HORIZONS | BDO'S GLOBAL VIEWOF MID-MARKET DEAL ACTIVITY 37
AFRICA M&A DEALMAKING ACTIVITY FALLS TO DECADE LOW LEVEL
delist PSG Group Limited in an effort to unlock the investment holding company discount on the Johannesburg Stock Exchange (JSE), with the company citing it as an ‘end of an era’.
• Regardless of the quarterly performance, we remain hopeful that rising commodity prices will benefit Africa’s mineral-rich continent, provided that the continent’s countries can weather the storm of drastically rising input costs. Q1 2022 will be remembered as the quarter with the lowest recorded deal activity in the last decade, with dismal deal volume and value at levels not seen even during the 2008 Global Financial Crisis. A total of just 17 deals were transacted with a combined value of USD 1.031bn. Following the trend seen in the last 12 months, Energy, Mining & Utilities and Financial Services were the most active sectors with four deals each, closely followed by Pharma, Medical & Biotech. Looking at the top deals in these sectors, we can clearly observe an increase in M&A activity in South Africa. The largest deal, which took place in Financial Services, was the result of yet another decision by asset managers to unbundle and subsequently
PSG’s share price appreciated by a staggering 38.4% following the
announcement, a reflection of the quantum of discounts applied to similar entities not only on the JSE, but other stock exchanges globally. The unbundling is valued at approximately USD 217m. PSG Group CEO Piet Mouton said: “In all our engagements with shareholders over the past five years a significant part of the conversations revolved around the discount at which we trade and what PSG Group can do to narrow such discount. In 2020, PSG Group unbundled Capitec, thereby unlocking USD 1.34bn of value for PSG Group shareholders. Despite this value unlock exercise, PSG Group continued to trade at a 30% discount.”
BIG PICTURE
• In Q1 2022 deal volume crashed to just 17 deals, with only three PE buyouts completed in the quarter. Deal volume also fell to USD 1.031bn, with PE deals accounting for just USD 96m. • In our previous edition, we reported that South Africa, in particular, has seen large-scale delisting activity in recent years. The entities listed on the Johannesburg Stock Exchange have declined to the lowest levels in memory to just 325 entities (as of Nov 2021) from the highs of circa 776 entities in the early 1990s, a decline nearly 60% over the past 30 years
PE/TRADE VOLUME &VALUE
70
6,000
60
5,000
50
4,000
40
3,000
30
2,000
20
1,000
10
0
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021 2022
Trade Volume
PE Volume
Total Value (USD M)
PE Value (USD M)
Made with FlippingBook HTML5