The uptick in local and foreign mergers and acquisitions (M&A) activity in South Africa, as well as the successful hosting of the G20 Summit, bode well for the country’s investment landscape, says Tamela Corporate Finance Executive, Kgolo Qwelane.
Qwelane’s comment follows Tamela’s recent involvement as an independent expert for information management company, Metrofile, which is currently being acquired by a US-based investor group, Mango Holding Corp. He says Metrofile represents a strategic opportunity for Mango Holding Corp to establish a regionally diversified platform in the information management and digital services sector across Africa and the Middle East.
“Not only will the deal give the investors immediate presence in South Africa, Kenya, Botswana, Mozambique and the Middle East through Metrofile’s operational footprint, it will give them access to a proven platform with a trusted brand, making it a strong foundation for digital expansion and business process automation services aligned with global customer demand trends.”
For Metrofile, the offer represents a unique opportunity for its shareholders to realise significant value with a premium exit and for its employees, customers and suppliers to participate in Metrofile’s digital expansion potential. Tamela’s role was to ensure shareholder protection, fair valuation and transparent decision-making. This involved reviewing historical financial information, analysing management forecasts and budgets, performing various valuations and considering the prevailing economic and market conditions, amongst others.
“I think the key aspect of the transaction that made it significant was the level of premium payable. In this case, it was roughly a 95% premium to the 30-day volume-weighted average price (VWAP) prior to the first cautionary announcement, which clearly provided shareholders with meaningful value uplift. More broadly, the transaction demonstrates that South African companies continue to offer attractive value to foreign buyers, partly due to the strategic market access they provide,” notes Qwelane.
He says the Metrofile acquisition is yet another deal indicative of a more resilient M&A market. “Several other deals, such as Old Mutual’s acquisition of 10X Investments, FirstRand’s acquisition of a 20.1% stake in Optasia, Premier Group’s acquisition of RFG Holdings, Nedbank’s acquisition of fintech company, iKhokha, and Exxaro’s acquisition of a portfolio of manganese assets, also underline this upswing. “It is encouraging that these companies have the confidence to consider how they should be allocating capital and what strategic bolt-on acquisitions could help strengthen their portfolios. This is despite various geopolitical uncertainties such as US-SA tension.”
Qwelane says M&A activity is a critical catalyst in moving companies forward, whether they are bulking up or gaining access to new technology that they did not quite have before. “It is also an effective way for large companies to consolidate their operations and divest non-core assets – a continuous process of analysing their portfolios and identifying opportunities for optimisation, always with the overarching goal of enhancing stakeholder value for all participants.”
He cites the Premier Group–RFG Holdings merger, noting that both companies, operating in the consumer goods sector, aimed to create a more compelling, robust and sustainable business. “Recent transactions in the Fintech space such as Old Mutual’s acquisition of 10X Investments will allow Old Mutual to go to market with a modern, low-cost, tech-driven platform aimed at attracting younger, digital-savvy investors. Concurrently, 10X Investments will gain capital for growth and tech investment, while maintaining its brand and operational independence.”
While the boost in M&A activity – especially investment by local players – means the market benefits from improved investor confidence, attractive valuations and evolving regulatory frameworks, this necessitates careful navigation by experienced local partners, especially for foreign investors. “In this respect, Tamela is well positioned to help identify opportunities and help our clients take advantage of them,” concludes Qwelane.