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Baker McKenzie’s latest analysis of Refinitiv data shows that the values of mergers and acquisitions (M&A) in the first half 2021 (H1 2021) soared in Nigeria and South Africa. Nigeria and South Africa are Africa’s two largest economies. Nigeria’s GDP was $432.29 billion in 2020, while that of South Africa was a distant $301.92 billion, according to the World Bank.

Twenty-eight M&A deals were recorded in Nigeria in H1 2021, which amounted to $1 billion. Compared to a year earlier, transaction volume rose by 17 per cent and deal value soared by 267 per cent.
 
Refinitiv data reveals that domestic transactions decreased by 15 per cent to 11 deals, and deal value increased by 342 per cent year-on-year (Y-o-Y) to $726 million. Cross-border transactions increased 13 per cent Y-o-Y to 17 deals, with deal value rising 8 per cent to $296 million. Financial companies were the prime targets for inbound deals, with four transactions showing a 100 per cent increase Y-o-Y and deal value of $10 million.
 
The US served as the primary investor for Nigerian companies, with four deals worth $13 million. The largest inbound deal into Nigeria in H1 2021 was Mwendo Holdings BV’s (South Africa) $182 million acquisition of Blue Lake Ventures Ltd (Media and Entertainment), announced in June 2021.

The value of M&A transactions in South Africa in H1 2021 amounted to $52 billion, with 169 deals announced in the period. Compared to the first half of 2020, transactions volumes decreased by 8 per cent but deal value increased by 958 per cent in the first half of 2021.
 
Refinitiv data shows that the volume of domestic transactions increased slightly to 80 deals, a 10 per cent increase Y-o-Y. Domestic transactions in South Africa in H1 21 were worth $46.7 billion, a dramatic 2148 per cent increase Y-o-Y. Further, cross-border transactions increased to 89 deals, with deal value surging to $5.4 billion.  

"Despite the excellent start to 2021, the unrest in South Africa threatens to impact the positive strides made in terms of foreign investment into the country in the first six months of this year,” said Marc Yudaken, Partner in the Corporate/M&A Practice at Baker McKenzie in Johannesburg. “For the sake of South Africa's post-pandemic recovery, the turmoil engulfing our country has to be ended before investors are forced to seek less risky alternatives.”

Yudaken said foreign investors will only ramp up their investments if they are confident their assets are safe. “They need political and economic certainty and must have confidence that there is rule of law in the countries in which they invest,” he said.

High technology companies were the primary targets for inbound deals in South Africa, with 12 transactions, representing a 200 per cent growth in deal volume Y-o-Y and a deal value of $160 million, an increase of 1997 per cent growth when compared to the same period last year.
 
“It’s no secret that African consumers have shown a growing reliance on technology across multiple platforms, even well before the pandemic struck,” Wildu du Plessis, Head of Africa for Baker McKenzie, explained. “The growth of the digital economy across the continent has naturally been accelerated by the pandemic and this unabated demand for technology has caused extensive cross-sector disruption, with the financial, energy, transport, retail, health and agricultural sectors all seeking opportunities to expand their tech infrastructure in order to acquire the necessary skills and innovation needed to keep up with demand. Fintech is also a popular tech sector for investment across Africa and specifically in South Africa, Kenya and Nigeria, with health-tech, mobility and agritech also attracting growing interest.”  
 
The United States was also the primary investor for South African companies, with 16 deals, an increase of 60 per cent Y-o-Y, valued at $496 million -- an increase of 340 per cent over the previous period. This was helped by TPG Capital LP’s $200 million acquisition of Airtel Africa Plc-Mobile (telecommunications) announced in March 2021. The largest inbound deal in H1 2021 was Temasek Holdings (Pte) Ltd’s (Singapore) $500 million acquisition of Leapfrog Investments (financials), also announced in March 2021.