Tracing the money from mergers and acquisition

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Desie Heita

Windhoek-International bankers pocketed the lion share of the money from African mergers and acquisitions transactions in the first half of this year, while African authorities received breadcrumbs.

Fees paid to African governments from all completed mergers and acquisitions transaction in Sub-Saharan Africa in the first six months of 2017, were at N$963,9 million or US$71,4 million.

Investment banking fees paid to investment bankers from the same transactions meanwhile totalled N$3,3 billion dollars, or US$244,7 million.

The nearly N$1 billion in fees is a 1 percent year on year increase, while the 3,3 billion represent a 12 percent increase. The information is contained in the latest quarterly report released by Thomson Reuters.

Citibank, Goldman Sachs, Morgan Stanley and China’s Construction Bank were the big suited boys in these transactions, who smiled all the way to the bank.

Earlier this year Namibia increased its merger fees paid to the Namibian Competition Commission, which now range from N$10,000 to N$500,000.

Nevertheless, the report notes that the value of mergers and acquisition during the first six months of 2017 stood at N$244,3 billion, the highest ever recorded since the first six months of 2013.

“Inbound mergers and acquisitions reached a four-year high of US$10 billion (about N$135 billion) with the United States, the United Kingdom and China leading investments, while outbound mergers and acquisitions declined 39 percent to US$1.8 billion (about N$24 billion) during the first half of 2017,” Sneha Shah, managing director for Africa region at Thomson Reuters says.

In its quarterly investment banking analysis for the region, Thomson Reuters said domestic and inter-sub-Saharan African mergers and acquisition totalled US$3.7bn (about N$50 billion) – up 38 percent year-on-year.

South Africa’s overseas acquisitions accounted for 71.9 percent of sub-Saharan African outbound mergers and acquisitions activity, while acquisitions by companies headquartered in the Mauritius accounted for 17.8 percent and Seychelles for 10.3 percent.

Exxon Mobil’s US$2.8 billion acquisition of 25 percent stake of a Mozambique liquefied natural gas project is still the largest deal to be announced in the region during the first half of the year, followed by the Vodacom Group acquisition of Vodafone Kenya in a US$2.5 billion stock swap transaction.

Syndicated lending fees declined, falling 60 percent from this time last year to US$33 million. Fees from debt capital markets underwriting saw an increase from US$13 million during the first half of 2016 to US$69.2 million during the first half of 2017.

Debt capital market underwriting fees accounted for 28 percent of the overall sub-Saharan African investment banking fee pool, the highest first half share since 2003. Both completed mergers and acquisition and equity capital markets generated 29 percent of the total fee pool, while syndicated lending fees accounted for 13 percent.

In equity capital markets, sub-Saharan African equity and equity-related issuance totalled US$4.8 billion during the first half of 2017, 28 percent more than the value recorded during the same period in 2016.

“Sub-Saharan African debt issuance raised a total of US$15.3 billion in proceeds during the first half of 2017. This was more than double the value recorded during the same period in 2016 and by far the highest first half total since Thomson Reuters records began in the 1970s,” added Shah.

The Ivory Coast was the most active issuer nation with US$6.8bn in bond proceeds, which accounted for 44.7 percent of market activity, followed by Nigeria and South Africa.

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