African M&A: Technology helping to renew optimism
How has African M&A fared during the pandemic? What might the market expect in the coming year? What impact is technology having on the industry? One thing that is clear from discussion at our recent webinar is that, despite a sluggish period on the continent, there is renewed optimism for the future.
Resurgence in M&A
Africa has had its share of ups and downs on the MA& front. Less than ten years ago, Africa was the darling of investors. However, Africa has lagged behind other mature markets in terms of dealmaking during the pandemic. But things appear to be looking up for the continent.
Last year, 2021 showed signs of a resurgence in dealmaking in Africa, with 87 deals in H1 2021 – a 15% increase yoy. And deal value for H1 2021 surpassed 2020’s total record low of US$9.7 billion, demonstrating increased in confidence in the continent among dealmakers.
Unsurprisingly, South Africa continued to be the most active country for dealmaking, in both value and volume: 41 deals in South Africa worth US$46.56 billion were announced during H1 – more than any annual value total since at least 2006.
TMT was the most active sector for South African dealmaking. But the sector is also seeing elsewhere in the region: in the largest TMT deal in the Turkish, Middle Eastern, Africa region, Nigeria’s Tingo International Holdings sold Tingo Mobile, a device and mobile business focused on agritech and fintech, for €3.1bn to Thai technology developer IWeb. Tingo Mobile, which has more than 9 million subscribers and annual revenues of US$616m, is believed to be one of the most valuable fintech groups to have emerged from Africa.
Moreover, the IMF is predicting GDP growth of 3.7% in sub-Saharan Africa; and while vaccination rates in sub-Saharan Africa are still significantly lower than elsewhere in the region, there has been enough progress across the region as a whole to help economies to reopen.
So, next year could be a very active year for dealmaking on the continent.
Data, due diligence, and dealmaking
With more deals comes more data. And the amount of data seems to be exploding as relates to due diligence. Over the past 18 months to two years, Datasite has seen a 20%-40% increase in what people store on their platform for the purposes of due diligence. This ranges from the usual documents to drone footage from site visits to recorded management presentations. People are leveraging technology, to communicate virtually instead of in person or to attend webinars instead of live events, as well as to get deals done.
But it’s not just the pandemic that is fuelling this adoption and use of technology. Prior to the pandemic, Datasite surveyed over 2,200 M&A practitioners and over half said they thought the due diligence process would take one month or less by 2025. Combine this with the data explosion and you have to ask: how can you perform due diligence quicker with all this data? And the answer is: with technology.
Admittedly, Africa may not yet be ready for 100% remote transactions. And there is still high value in human, direct engagement. But people are moving away from the automatic reaction that everything must be done in person and by getting on a plane. Technology can create better efficiencies on deals, and it also creates more responsible dealmaking from a climate change perspective.
So, Africa, as well as the rest of the world, can look forward to a much more efficient and much more responsible, and still very diligent, way of doing business going forward.