M&A Excellence: Harnessing Strategies, Innovation, and Technology for Success

The insights from these seasoned dealmakers underscore the importance of adaptability, innovation, and thorough preparation in navigating the complexities of dealmaking in South and Sub-Saharan Africa. By leveraging creative deal structures, conducting rigorous due diligence, understanding macroeconomic and regulatory dynamics, and focusing on resilient sectors, dealmakers can successfully navigate challenges and seize opportunities in this dynamic market.

Could you both share a bit about your careers in M&A?
I have nearly 20 years of investment banking experience, both domestically and internationally. I took over the team from a corporate advisory investment banking perspective about three years ago. Ruven and I worked together at Goldman Sachs before I joined Investec in 2017. I’ve been with Investec for almost eight years now.

Marc, when do you think we’ll see a turnaround in M&A activity? Do you think it’ll be later this year or not until 2025?
Towards the end of last year, we saw some green shoots of activity, mainly in the boardroom rather than in the public domain. However, with inflation being higher and central banks taking a more cautious outlook on the rate cycle, there may be a pause in the turnaround of activity. Despite this, we saw the return of mega deals in the first few months of this year, such as the BHP offer for Anglo American. These mega deals are happening, even in a constrained macroeconomic environment.

What do you see as the likely drivers of M&A activity?
In South Africa, there are opportunities due to the valuation disconnect between local companies and their international peers. Companies with strong balance sheets and strategic positions can consolidate sectors and capitalize on undervalued assets. The outcome of the election and improved electricity generation could further enhance the local market outlook.

How are dealmakers getting creative with deal structures to overcome valuation gaps or bring buyers and sellers to a point where they can close a deal? Are we seeing potentially more JVs and club deals becoming more common? What are you noticing when it comes to deal structure?
There is a prevalence of risk-sharing between buyers and sellers, which often plays out over time post-transaction. Paying away and receiving value on day one can be complex, so sharing risk and returns over a period of time is becoming more common. Projections of underlying companies’ business performance are used to structure deals, but given the volatile environment, certainty and comfort are difficult to achieve. Therefore, sharing risk and returns over a two-to-three-year period post-transaction is becoming more common. Joint ventures (JVs) are one of the mechanisms for sharing risk and rewards.

What are your thoughts on the evolving role of technology in the deal process?
Technology and tools are increasingly prevalent in sourcing information and streamlining processes. However, it is difficult for technology to replace the analysis and human element behind the nuances of the data. Experience and expertise in volatile markets are hard to replicate. Technology is a tool, but it’s not the answer to all questions in deal-making.