M&A activity on the rise in Sub-Saharan Africa With a total deal value at USD 30.

3 bn, up 29% from 2012, 2013 was the best ear for !"# transa$tions in the SS# re%ion sin$e 2010, when the value of transa$tions was USD &1 billion. 'his was in stron% $ontrast to a relativel subdued !"# a$tivit in the rest of the world, where the value de$reased b (.2% in 2013. 'he rise in SS# deal a$tivit $an be ma)orl attributed to hi%h %rowth rates of the re%ion, amid a %rowin% middle $lass, leadin% investors to see* investment opportunities in the re%ion. While ener% and power se$tor was the most a$tive, a$$ountin% for more than (9% of the total deal value in the re%ion, !o+ambi,ue was the most tar%eted SS# $ountr with a 3&.-% mar*et share from seven deals valued at USD 9.( bn. SSA acquisition targets commanding premiums owing to high growth expectations 'he enterprise value ./01 to earnin%s before interest, ta2, depre$iation and amortisation ./34'D#1 multiples in the SS# re%ion avera%ed at 22, $ompared to in the US, representin% a 22% premium for SS# a$,uisitions. 4n line with this, the /0 to 5evenue multiples avera%ed 22 in the SS# re%ion, $ompared to in the US, refle$tin% a 22% premium or SS# tar%ets. 'his was mainl driven b the hi%h premiums paid b the #sian investors, espe$iall in the e2tra$tive industries .22% for SS# tar%ets1, whi$h boosted the valuations in 2013. 'he $onsumer mar*ets se$tor and tele$ommuni$ations se$tor also $ommanded hi%her valuations $ompared to the transa$tions in the US, with the premiums standin% at 22% and % respe$tivel . 'he premium on a$,uisition multiples in the re%ion $an be primaril attributed to the investors6 hi%h e2pe$tations around %rowth prospe$ts for SS# $ompanies in the $onsumer mar*ets and tele$ommuni$ations se$tors. Non conventional sectors to see heightened activity 3e ond minin% and oil " %as se$tors, the non7$onventional se$tors, in$ludin% the $onsumer7driven se$tors su$h as retail, health$are and finan$ial servi$es, are e2pe$ted to witness a %rowin% deal a$tivit in the re%ion 2018. 'he re$entl announ$ed a$,uisition of internet provider 9eotel b 0oda$om %roup is e2pe$ted to stimulate further a$tivit in the tele$ommuni$ations, media and te$hnolo% .'!'1 se$tor, whi$h saw an in$reased in deal volume in 2013, up (0% from that in 2012. :harma$euti$al se$tor, another most a$tive se$tor in 2013 with a total deal value of USD 2.3 bn, is e2pe$ted to see robust a$tivit as the pharma $ompanies loo* to %row the SS# re%ion, amid the re%ion6s %rowin% e$onom and per $apita in$ome. ;inan$ial servi$es also offer possibilit for si%nifi$ant deal a$tivit , fuelled b further restru$turin% in 9i%eria6s ban*in% se$tor. Cross border deals on the rise <ross7border deal ma*in% in the sub Saharan re%ion is e2pe$ted to in$rease in 2018, mainl driven b the positive %rowth trends in re%ion, amid the relativel wea* e$onomi$ %rowth of %lobal developed mar*ets, whi$h offer less attra$tive opportunities. =utbound !"# is e2pe$ted to in$rease in $ountries li*e South #fri$a, 9i%eria, >hana, ?en a, 'an+ania, !o+ambi,ue and #n%ola as the $ontinue to pursue the SS# re%ion6s ri$h natural resour$es and loo* for diversif in% $apital awa from the domesti$ mar*et. 'he $ross border deal a$tivit is also e2pe$ted to be boosted b inbound bu ers from #sian $ountries su$h as <hina, who are see*in% SS# tar%ets for in$reasin% their revenue base.

@<hina has a bi% interest in #fri$a, parti$ularl its vast natural resour$es. 3ut its interest is more $omple2 than that,A a$$ordin% to a partner at a South #fri$an7based private e,uit firm. @<hinese $ompanies in$reasin%l see the #fri$an mar*et as havin% %reat potential for in$reasin% their sales and revenue. <hinese produ$ts are alread a bi% hit in #fri$a and now <hinese $ompanies are loo*in% to set up their own plants and fa$ilities in the re%ion b a$,uirin% #fri$an $ompanies.A South #fri$a was identified b -9% of respondents as the #fri$an $ountr that is e2pe$ted to be the busiest $ross7 border a$,uirer over the ne2t ear. @South #fri$a is the %atewa to sub7Saharan #fri$a and is the re%ion6s most developed e$onom ,A said one dire$tor of a private e,uit firm in 'o%o. @South #fri$an outbound !"# is e2pe$ted to rise as South #fri$an $ompanies $ontinue to pursue the $ontinent6s ri$h natural resour$es and see* to diversif $apital awa from the domesti$ mar*et.A #fter South #fri$a, 9i%eria and >hana were e2pe$ted to be the ne2t most a$tive $ross7border a$,uirers over the ne2t 12 months in #fri$a, followed b ?en a, 'an+ania and #n%ola respe$tivel . 'wo reasons are offered for this e2pe$ted in$rease in $ross7border a$tivit . ;irst are the positive %rowth trends on the $ontinent, and se$ond is the relativel wea* e$onomi$ %rowth of %lobal developed mar*ets, that offer less attra$tive opportunities. @'he %rowth numbers in #fri$a are ver %ood when $ompared with the rest of the world,A said the dire$tor of a private e,uit firm in 'o%o. @Developed world $ountries are %enerall flat or ne%ative at the moment, while emer%in% mar*ets in #fri$a offer more opportunit .A

Bowever, the lar%e ma)orit of respondents .9(%1 indi$ated that the e2pe$t a$,uisitions in the $ontinent from international bidders to rise in 2018. #sia7:a$ifi$ was identified b 98% of respondents as one of the most a$tive re%ions in terms of the sour$e of in7 bound bu ers in !"#. @<hina has a bi% interest in #fri$a, parti$ularl its vast natural resour$es. 3ut its interest is more $omple2 than that,A a$$ordin% to a partner at a South #fri$an7based private e,uit firm. @<hinese $ompanies in$reasin%l see the #fri$an mar*et as havin% %reat potential for in$reasin% their sales and revenue. <hinese produ$ts are alread a bi% hit in #fri$a and now <hinese $ompanies are loo*in% to set up their own plants and fa$ilities in the re%ion b a$,uirin% #fri$an $ompanies.A

4nvestment ban*ers believe the #fri$an $ontinent holds promise for 2018. 3etter ma$ro poli$ies and better %overnan$e are improvin% the business environment. 'o%ether with demo%raphi$ %rowth, this is $reatin% tremendous opportunities for business e2pansion and >D: %rowth. Be addsC @=ften, strate%i$ investors will need to ma*e a lo$al a$,uisition to %et a$$ess to soft s*ills and, most importantl , a$$ess to a route to mar*et.A South #fri$a has alread been a tar%et for !"# and investments in the resour$es on the east $oast of #fri$a in parti$ular have also been a$tivel sou%ht. 3e ond, minin% and oil and %as, some dealma*in% advisers e2pe$t $onsumer7fo$used industries su$h as fast7movin% $onsumer %oods %roups or ban*in% to be the sour$e of %reater dealma*in% in the future. 9ot )ust multinational $orporations, but also private e,uit %roups are *een to find entrepreneurs to ba$* in sub7Saharan #fri$a, sa ban*ers. =ne notable deal advisers point to as an e2ample of the *ind of thin% bu ers are loo*in% to do is the bu out of ;an !il*. ;an !il* was west #fri$a6s leadin% manufa$turer and distributor of fro+en dair produ$ts and )ui$es and an i$oni$ brand. 'his summer, the private e,uit %roup #braa) a$,uired it for an undis$losed sum. 'he %roup has been an a$tive investor in the $ontinent, deplo in% D2.2bn in (9 $ompanies. 4n a re%ion where supermar*ets have et to ma*e their mar*, the ;an !il* deal shows how attra$tive a %roup with sprawlin% subsidiaries a$ross the rapidl %rowin% mar*ets of >hana, 9i%eria, 'o%o, 4vor <oast, 3enin and 3ur*ina ;aso $an be. ;an !il*, throu%h its subsidiaries, sells more than 1.-m produ$ts on a dail basis a$ross west #fri$a. 3ru$e /mble , a $orporate partner at ;reshfields, whi$h advised on the deal, sa sC @# number of our $lients are a$tivel fo$used on #fri$a. /ver one would e2pe$t more investment in #fri$a, but there is less a%reement on the se$tors of future investor fo$us. @#braa)6s ;an !il* investment mi%ht not have happened three or four ears a%o. We e2pe$t to see more deals in the $onsumer and finan$ial servi$es se$tors. 3ut it won6t be as if deals in oil, %as and minerals will be$ome irrelevant.A #$$ordin% to resear$h b the law firm, the value of #fri$an inward investment has tripled in the past 10 ears, rea$hin% more than D1-2bn while deal volumes had doubled b the end of 2012, rea$hin% 2,81E. 4n 2012, international investors a$$ounted for half the total value of #fri$an !"#, $ompletin% 2&& deals worth D20bn out of a total of D39.&bn and E&- deals. 'his is up from D(.8bn and 122 deals in 2003. =ver the past 10 ears, the U? has been the most a$,uisitive nation in #fri$a F with some advisers believin% <ommonwealth lin*s are a drivin% for$e behind that. Some ban*ers sa )oint ventures will remain a feature of deals. =ne e2ample is the investment b BS3< and #fri$a private e,uit %roup Sat a $apital into $onsumer %oods businesses <hemi and <ote2 4ndustries. 'hese stru$tures help miti%ate ris* for investors while allowin% founders to retain a *e interest in their businesses as the e2pand.

stablishing of AC monetary union to foster trade 'he heads of the five $ountries that are members of the /ast #fri$an <ommunit ./#<1 F ?en a, 'an+ania, U%anda, 5wanda, and 3urundi F who alread have a $ommon mar*et and a $ustoms union, in 9ovember 2013 si%ned a proto$ol to establish a sin%le monetar union, the /ast #fri$an <ommunit !onetar Union ./#<!U1, within 10 ears. 'hrou%h /#<!U, member nations aim to s n$hroni+e their monetar , fis$al, and e2$han%e poli$ies. ;urthermore, the move e2tends support to re%ional trade within the blo$ with its $ommon $urren$ arran%ement. 'he proto$ol also provides for establishin% a re%ional $entral ban*. AC to benefit from closer regional integration 'he monetar union setup, whi$h involves dealin% with $ommon $urren$ , is e2pe$ted to redu$e the $ost of doin% business amon% its members b doin% awa with forei%n e2$han%e fees. 'his would not onl enhan$e /#<6s re%ional and %lobal trade but also promote $ompetition, thus offerin% produ$ts at lower pri$es to the $onsumers. /$onomi$

stabilit , inte%ration of the finan$ial stru$ture, and effi$ient allo$ation of untapped resour$es are some of the other benefits e2pe$ted from the /#<!U. !ulfilling certain norms must for ACM" to materialise 3efore establishin% the monetar union, the member states are re,uired to adhere to $ertain $onver%en$e $riteria and maintain them for a minimum of three $onse$utive ears. 'his in$ludes maintainin% headline inflation .-%1, fis$al defi$it with %rants .3% of >D:1, debt .&0% of >D: in net present value terms1, and a reserve $over .8.& months of imports1. 4n addition, there are three indi$ative $riteriaC $ore inflation .GH&%1, fis$al defi$its $eilin% with %rants .GH(% of >D:1, and minimum ta27to7>D: ratio .2&%1. <urrentl , thou%h the $ountries are within the threshold with re%ards to debt as a % of >D: , mu$h needs to be done on other fronts. #essons from other unions to help in ACM"$s success While the union enhan$es /#<6s positionin% on the %lobal map, it renders the re%ion sus$eptible to ris*s fa$ed b unions su$h as the /U. :oli$ ma*ers should intensivel stud the $onver%en$e $riteria of these unions and in turn devise a lon%7term publi$ poli$ a$ross partner states. 'he /#<!U $ould be su$$essful if ea$h member is prepared to embra$e a $ommon $urren$ and be liable to a $entral fis$al and monetar bod alon%side underta*in% ade,uate efforts to meet the re,uired level of $onver%en$e.