Sub-Saharan Africa M&A deals falls 13% to $7bn in Q1’22

. Hi-tech most targeted sector

Despite increased interests in the high technology (Hi-tech) sector, the value of announced mergers and acquisition (M&A) transactions in sub-Saharan Africa (SSA) fell 13% to $7 billion in the first quarter (Q1) of 2022, compared to the same period in 2021.

It is also a four-year low, despite an 11% increase in the number of deals, according to the 2022 investment banking report released yesterday by Refinitiv, a global provider of financial market data and infrastructure.

Also, SSA investment banking fees during the same period shed 9%   year-on-year to about $97.3 million, the lowest sum posted since 2014.

To top it off, Sub-Saharan African debt issuance totalled $9.4 billion in Q1 2022, down 30% from the value recorded a year earlier, although historically high with only 2018 and 2021 registering higher first quarter totals.

However, it was not all losses during the first three months of 2022, as the region’s equity and equity-related issuance totalled $496.9 million, compared to just $18.4 million during the same period last year.

The investment banking report also showed a mixed bag of fortunes in other financial analysis:

Investment banking fees

Equity capital markets underwriting fees declined 1% to $8.8 million, the lowest Q1 total in 12 years. Debt capital markets fees fell 16% from last year’s record start to $40.7 million, while syndicated lending fees crashed 81% to $6.3 million. 

Advisory fees earned in the region from completed M&A transactions reached a three-year high of $41.4 million, an increase of 163% compared to the first three months of 2021. 

Broken down, the report showed that 79% of all SSA fees were generated in South Africa in Q1 2022, and 33% were earned from deals in the Hi-tech sector.

Goldman Sachs earned the most investment banking fees in the region during the period with a total of $11.4 million or an 11.7% share of the total fee pool.

M&A transactions in SSA fell 13% to $7 billion in Q1 2022, compared to the same period in 2021. It is also a four-year low, despite an 11% increase in the number of deals.

M&A deals

Deals worth $5.2 billion involved a sub-Saharan African target, a 10% increase from Q1 2021.  While domestic deals dropped 17% year-on-year, inbound deals involving a non- SSA acquirer rose 44% to $3 billion, the highest first quarter total in five years. 

Meanwhile, sub-Saharan African outbound M&A totalled $776 million, less than half the value recorded a year ago, plus a 15% decline in the number of deals.

Again, Hi-tech high was the most targeted sector by value in SSA in Q1 2022, while the financial sector saw the highest number of deals in the region. 

South Africa was also the most targeted nation, with $2.5 billion in M&A announcements, or 48% of total activity recorded in the region. With advisory work on deals worth a combined $1.8 billion, Goldman Sachs held the top spot in the financial advisor ranking for deals with any SSA involvement during Q1 2022.

Equity capital market

All proceeds were raised by follow-on issuance with MTN Nigeria Communications and South African coal exporter Thungela Resources among those in the region raising new equity funds from follow-ons. No convertible or initial public offerings were recorded in the region.

Issuers in Nigeria raised more in the equity capital markets (ECM) than any other SSA country in Q1 2022 with a total of $277.1 million, while South African issuers raised a combined $219.9 million.

Morgan Stanley took first place in the region’s ECM underwriting league table during the period in review with a 23% market share, followed by Java Capital with 13%.

Debt capital market

The number of issues fell 43% from last year at this time. South Africa was the most active issuer in Q1 2022, accounting for 59% of total bond proceeds, followed by Nigeria (22%), and Ivory Coast (14%).

Issuers in the technology sector accounted for 56% of proceeds raised during the first quarter, while government & agency issuers accounted for 27%. Citi took the top spot in the SSA bond bookrunner ranking with $1.7 billion of related proceeds, or 18.1% market share.

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