While the deal pipeline has slowed in the past year, business law firm Cliffe Dekker Hofmeyr (CDH) says that, notwithstanding the current volatility, there are opportunities for investors who take a longer-term view.
“The weakness in the currency is not all negative as it creates opportunities in the medium to longer term,” says Willem Jacobs, director and national head of CDH’s corporate and commercial practice. “South Africans have, understandably, become extremely negative about the economy, government and the country in general, but we are not doing ourselves any favours.
“If we keep on telling the world that South Africa is no longer an attractive investment destination, then it becomes a self-fulfilling prophecy. Instead, we should be focussing on the positives and assist the country in attracting more foreign investment, which we desperately need.
“The message government was trying to get across in Davos recently was that we are open for business and we, as dealmakers in South Africa, need to support that,” says Jacobs.
CDH recently clinched top honours in the DealMakers’ Awards for M&A deal flow for the seventh year running.
The team’s 79 M&A deals in 2015 had a combined value of R178-billion. In addition, the firm was ranked first for deal flow and second for deal value in the corporate finance transactions legal adviser tables, having advised on 66 corporate finance deals in 2015 worth R80-billion. It achieved fourth place overall in terms of M&A deal value.
DealMakers records every M&A deal and corporate finance transaction entered into by South African listed companies.
Jacobs says that while there is a lot of “doomsday talk” at the moment – and the risk of a further rating downgrade exists – from a merger and acquisition perspective, deals will continue to be done.
“South African businesses understand the need for growth and if this is not going to take place in South Africa – which is forecast to grow at a paltry 0,7% according to the IMF – then they will look elsewhere,” he says.
“They are likely to see opportunities for mergers and acquisitions in the rest of Africa, Europe, Asia and the Middle East, and we have already seen that happen.”