Despite a decrease in appetite for emerging-market assets in recent months – owing to the current drought, commodity exposure and the global economy’s risk aversion – there remains a fair amount of activity within the local mergers and acquisitions (M&A) market, as well as a compelling opportunity for acquirers to take advantage of distressed South African companies, says Nedbank corporate and investment banking advisory head Shabbir Norath.
Norath said in a note on Monday that, owing to a steady price decline in several listed stocks, a number of South African companies were looking for new strategic equity partners to bolster their balance sheets with capital injections, which presented a key opportunity for offshore funders.
“Despite funding lines from banks becoming fairly hard to come by, many of these distressed businesses present a compelling acquisition proposition for those acquirers brave enough to look past the current environmental challenges and see the fundamental strengths that underpin many of these businesses,” he said, adding that these types of companies had a lot to offer in terms of high-quality assets that could outperform when the markets picked up.
“Short-term volatility and instability aside, there are many investors that clearly recognise the opportunities to be had across Africa.
South African companies and investors with the means and willingness to take a long-term view would certainly be well advised to do the same,” he said.
