THE financial services sector is expected to experience an uptick in mergers and acquisitions (M&A) activity worldwide as it continues to stabilise following the 2008 financial crisis.
Law firm Allen & Overy, which specialises in corporate and M&A law, said the top three target sectors for M&A activity last year had been industrial and manufacturing, “financial assets”, and telecoms. The firm expects this trend to continue this year.
The South African financial services sector contributed major deals including investment holding company Brait’s acquisitions of majority stakes in UK companies New Look and Virgin Active, which cost nearly £1.5bn combined; while insurer Sanlam spent $375m on 30% of Morocco’s Saham Finances.
Earlier in the year, Standard Bank finalised the 60% sale of its London unit to the Industrial and Commercial Bank of China for $690m.
Barclays is reportedly mulling the sale of local subsidiary Barclays Africa following the closure of investment banking offices in nine countries across three regions.
“Investors are asking (if) South African assets are going to give them higher rand-based earnings,” Dominic Morris, a partner at Allen & Overy, said yesterday.
The weak rand, which has plunged 45.15% against the dollar in the past year, has not helped.
Mr Morris said investors were sometimes forced to sell assets deemed non-core — as was happening in the global banking sector.
European investment banks, in particular, were axing staff, leaving large US banks such as JPMorgan, Goldman Sachs and Morgan Stanley in a more dominant position.
But Mr Morris said this had not hampered competition in M&A finance.
“There is lots of competition in the market, especially between US and European banks,” he said.
South African companies made 30 outward investments worth R33.2bn last year. The country also received three inward investments; two worth R1.8-trillion and the other for an undisclosed amount.
Lionel Shawe, an Allen & Overy partner, said foreign investors tended to bring their investment bankers, who sometimes partnered with local bankers, who liaise with local investors.
SOURCE: http://www.bdlive.co.za/
WRITTEN BY: MOYAGABO MAAKE