There has been an increase in M&A activity, especially in East and West Africa, as European multinationals search for opportunities to counter slowing growth at home, according to Fradreck Shoko, Head of Global Advisory for Standard Bank.

Africa’s Mergers and Acquisitions (M&A) landscape remains buoyant with $158bn worth of deals announced in Africa last year.

The standout industries in this regard in Africa were the financial, fast moving consumer goods (FMCG) and telecommunication sectors.

“Insurance companies have held up valuations and international companies are positioning themselves for the long term,” Shoko said.

“We also expect further consolidation within the broader financial sector as industry players seek to comply with increased regulations and meet minimum capital requirements as well as improve efficiencies through economies of scale,” he added.

FMCG and consumer-driven industries continue to attract investor interest.

Africa has the most favorable forecast demographics globally and, one of the fastest growing middle classes in the world, consequently, M&A activity within this sector is expected to remain high and increase.

Emerging markets, however, remain particularly susceptible to negative global economic developments and investor sentiment. Increased uncertainty and risk aversion causes global investors to move investment away from emerging markets which results in increased volatility and lower prices.

The South African market, along with other African markets is also affected by this and when combined with domestic economic challenges seem to be less attractive than before.

Shoko stressed: “We are very cognisant of and realistic about the challenges in Africa and particularly in South Africa as our home market. We have a good understanding of these markets and aim to help our clients in both bull and bear market environments.”

“Even if we enter another period of crisis, we expect that companies would retain their core objective of investing for the long term. We would thus still expect a significant number of successful transactions. We want our clients to invest and pick the long term ‘winners’ when others are fearful,” he said.

According to Shoko, the sectors that stand out as opportunities for M&A in Africa not only continue to be the financial and FMCG sectors but also includes natural resources.

He noted that, particularly in the mining sector, the low share prices, uncertainty and announced restructurings makes this the ideal time to invest in this currently ‘unloved sector’.

“Even though we do not expect commodity demand levels to match supply in the short term to allow for an increase in prices, the balance sheet pressures many companies are subject to means that assets can and do change hands at levels well below their intrinsic value,” he said, adding that this would likely result in an up-tick in M&A deals.