S Africa M&A activity surpasses global average
A new survey has revealed that despite an uncertain economy and plunging business confidence, nearly half of South African businesses have explored merger and acquisition (M&A) opportunities.
Auditing and accounting firm Grant Thornton said that, at 49%, the corporate transactions of local companies had outpaced that of the global average of 39% over the past year.
The firm’s 2014/15 ‘International Business Report on M&A’ showed that 76% of the companies growing through acquisitions were driven by the need to build scale, with 74% pursuing acquisitions to gain access to new geographic markets, while 61% undertook the deal to obtain new talent or skills.
“It is clear that companies are starting to take advantage of opportunities to consolidate and grow their operations at a time that the economy is under increased pressure. For some, this is also a precursor to expanding their footprint outside of the country. The scale from such consolidation helps to ease geographic expansion,” Grant Thornton Johannesburg CEO Andrew Hannington said on Tuesday.
The report found that 80% of the acquisitive companies leveraged retained earnings to fund growth, with only 53% of respondents planning to use bank debt to finance deals, compared with 57% of businesses worldwide that were seeking out debt to finance deals.
The survey further revealed that 28.5% of businesses anticipated a change in ownership in the next three years, up from 21% in 2013 and 15% in 2012, while only 14% of business owners globally aimed to sell within the next three years.
The survey interviewed more than 5 400 CEOs, MDs, chairpersons and senior executives from all industry sectors between September and December 2014.
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