Navigating the Deal-Making Landscape: Insights and Strategies for South and Sub-Saharan Africa

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.

Tell us a little bit more about yourself and your career so far and what it is you do?
Morné and I have actually been partners for the last 30 years. I focus more on the investment and the financing side, whereas Morné focuses on the M&A deals. We both have a history of conducting inbound and outbound investments from South Africa.

What are your expectations on when might financing conditions improve?
Let me just speak from my own experience and the deals that we’ve got in the pipeline at the moment. From an inbound point of view, I think there are huge pricing opportunities; assets are perceived to be quite cheap at the moment and furthermore the nature of these assets is important. Again, in the context of the geopolitical scenario that we’ve just discussed, the fact of the matter is that South Africa does sit on strategic assets. Both in the mining sector and also insofar as food security is concerned. I think those are very strategic. And from an inbound point of view, there remains a lot of interest in South Africa as a result of that.
From an outbound M&A perspective, I think you have quite a lot of well-established South African businesses who are looking at opportunities in offshore markets at the moment to find some kind of a hedge in their asset portfolio against the risks associated with South Africa and, with the depreciation of the rand – to find some balance in their portfolios for investors. So that is where the driving forces are aligned at the moment.

Do you think companies are going to be more offensive or defensive? And by that, I mean, often in downturns, you see companies getting rid of non-core assets. You see opportunities emerge in restructurings and maybe some consolidation in the market, versus companies that have now trimmed down, have deleveraged their balance sheet and are still trying to build up war chests to be more proactive and on the front foot. How do you see that balance evolving over the course of the year?
You are going to see more offensive transactions. We are currently holding mandates to look at one or two other very interesting offensive actions. On the defensive action side, I think you will see that, by and large, if you look at South African entities, a lot of them have already started to get rid of non-core businesses, resize themselves and so on, because during the last few years, South African- based companies were forced to do that in order to refocus and align their strategies. And now, it’s a good time to deploy that if you’ve got the financing shoulder or the war chest on your balance sheet.

What are you seeing in deal structuring in order to navigate this complexity?
Your planning has to be of such a nature that you must have a line of sight on all of these challenges and that you are ready to deal with them. That’s where the whole notion of creative thinking becomes very important. Right from the outset, designing and putting an architectural structure around your deal plan. So that you don’t head off in a direction and then start running into roadblocks and you get stuck. That’s when things go wrong. The issue around greater thinking about creative funding is important. And that’s where quite a lot of the magic lies.
But I also do think just in structuring the transaction itself, the way that you decide to sequence things, which are the areas that you’re going to focus or let’s say your competition aspects, you have those things in mind and be creative in the way that you approach the deal. So deal making is no longer a dogmatic kind of playbook where it’s foreseeable that things are going to play out in a certain way. You need to spend much more time right at the beginning of the deal to actually plan for where things are going to possibly go wrong and what do you do then.

How does that then start feeding through more into the impact on your due diligence? Because it’s quite clear that deal makers therefore must be ramping up their due diligence efforts. What areas of due diligence are then becoming more of a focus in deal- making and earlier on in the process?
A real risk for me, is especially legal advisors, who for almost the last decade have had a field day, saying: ‘A due diligence. Fantastic. It’s not a real risk I can throw 30 of my youngsters at it, prepare a 400-page due diligence report that highlights every single bit, including ‘licences’ spelt with an S rather with a C for the noun’, you know, that sort of thing. Not a real risk. I don’t think W&I insurers are going to make sense of it and then of course when you have to talk to your investors you’ve got to assume they would want to understand what the real risks are, so that bit has been a big change.
Another aspect I want to highlight is how the use of AI in due diligence could change the game plan moving forward. We’ve started to see some of its impact, but not yet in full. AI is being used not only for document review but also to identify industry challenges. I believe this will be a significant game changer going forward. It’s very interesting.