Mixed bag for Q1 cross-border M&A activity
The weaker rand is expected to result in a slowdown in South Africa’s outbound mergers and acquisitions (M&A) activity into developed countries and shift outbound investment toward developing countries.
Law firm Baker & McKenzie partner Morné van der Merwe on Monday said a weaker rand should, however, also promote inbound investment into South Africa if the political climate stabilised, the regulatory environment was clarified and if South Africa avoided a downgrade of its international credit rating to junk status.
Baker & McKenzie’s latest quarterly Cross-Border M&A Index showed that South Africa’s cross-border mergers and acquisitions (M&A) activity remained resilient in the first quarter of this year, with inbound M&A deal value up 10.5% year-on-year.
Deal value was, however, 90% lower than in the fourth quarter of 2015, but this was expected, given that the fourth quarter had been the busiest quarter of 2015 in terms of M&A activity.
Further, while the number of outbound M&A deals had increased to nine in the first quarter of this year, compared with six in the first quarter of 2015, the deal value was about $50-million lower year-on-year.
“We believe this is mainly attributable to a weakening rand against the dollar,” said Van der Merwe.
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