Mergers-Acquisitions and Public-Private Partnerships: relatively little explored tools for mobilizing productive investments in Africa

According to MergerMarket, M&A transactions declined in value by 6.6% compared to 2019 to stand at $ 3,163 billion and an even greater drop in the value of cross-border transactions, estimated at 1 296.1 billion dollars in 2020, a reduction of 14.2%. The reduction in the number of cross-border transactions is even more important than the general decrease in transactions: M&A transactions have therefore been more continental, national in 2020.

Despite the drastic drop in North America’s relative share (from 50.5% to 41.9%), the North American space remains by far the primary theater of M&A operations. The 7.4% increase in the value of operations in Asia, allows this continent to represent 23% of the global M&A market. Due to larger transactions such as the Merger between S&P Global and IHS Markit in England ($ 43.2 billion), Europe retains its second place, and its relative share increases by 23.7% to 26.8%.

The Middle East and Africa together record the poorest performance in this market. This overall decline is mainly due to a drastic drop (56.6%) on the African continent from 22.6 to 9.8 billion, its lowest level since 2002.

As noted in the Africa Pulse report of the World Bank in March 2020, capital outflows in emerging and developing economies (excluding China) were greater than those observed at the height of the financial crisis of 2008. The report highlights the 1.75 billion exit from South African portfolios observed during March 2020. However, Foreign Direct Investments represent an essential engine of M&A activity.

In order to continue to develop on a continental and global scale, we recommend to companies located in Africa, a market with high potential growth (almost a quarter of the world population in 2050 (22%) and more than a third in 2100 (37%) according to the United Nations) and interested in external and conjoint growths, to:

1- Strengthen their management procedures and their mode of governance;

2- Continue to improve their products and services, thus demonstrating their know-how;

3- Get closer to national and international Private Equity actors.

According to EMPEA (Emerging Market Private Equity Association) cited by France Invest in 2018, Africa represents 7% of the amount invested in emerging and developing countries compared to 70% in Asia. Of these 7%, South Africa is in the majority with 27% and Central Africa has the smallest share around 10%.

According to the 2018 report of the Consortium for Infrastructure in Africa (ICA), out of an estimated annual need of 160 billion dollars per year in infrastructure in Africa, the continent has succeeded in mobilizing 100.8 billion, thus exceeding the milestone of $ 100 billion, despite having a gap close to $ 60 billion this year. International financial institutions, in particular the World Bank, cited by France Invest (2018) agree on the fact that a significant part of the recurrent deficit of investments in infrastructure is inherent in the quality of the preparation of projects, particularly of the Partnership type. Public-Private and the procedures associated with their implementation.

In order to contribute to absorbing this important gap, in accordance with its vision and its strategic sectors, EFA Office, through its range of services Stephane MBATEU Investment (SMB Investment) works to identify and prepare projects for African and international companies, interested in external growth and joint growth.

We are convinced that Merger and acquisition transactions, associated with Public-Private Partnership transactions mainly in Infrastructure, with Private Equity actors and public authorities, will accelerate the emergence of African economies.

A. Stéphane MBATEU, Financial Entrepreneur

Neuilly sur Seine, December 07, 2021.

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