In 2022, we saw increased foreign-buyer interest in South African businesses, with investors favouring South Africa as an alternative investment destination.
The quality of skillset, low production costs, occasional low material prices and easy access to the rest of Africa, which through AfCTA gives access to 1.2 billion customers in over 55 countries, are just some of the investment attractions.
Sub-Saharan African economic growth is forecast at 3.6% for 2022 and 3.7% in 2023, according to the World Economic Outlook report published by the International Monetary Fund in October 2022. This, when compared to a global forecast of 3.2% and 2.7% for 2022 and 2023 respectively, makes SSA and other developing regions with similar or higher growth rates attractive to investors.
When considering the opportunities that the SSA region has to offer, coupled with the strong infrastructure and operational capabilities of the underlying business assets, one can easily conclude that South Africa can present a strong investment case.
So, how do we at Deal Leaders International find the right international buyers for our clients?
We have a strong team that does extensive research and assessment to understand the core needs of our clients. First, we ensure a thorough understanding of our client's vision and business, and work through a detailed M&A strategy with them. Based on the client’s needs, a research strategy is developed and adopted to identify and locate potential buyers with like-minded and aligned interests.
With our client's approval, we engage with the identified potential buyers, confirm alignment and arrange a high-level introductory meeting with both parties to understand each other’s vision and to establish common ground and cultural fit.
We pride ourselves in establishing win: win opportunities for both sellers and buyers. Our interest is ensuring post-transaction alignment, growth and sustainability. This ethos is identified in many of our transactions.
One such transaction currently underway involves a 4th generation family-owned business and an international buyer. Our research and investigation identified the buyers as key strategic partners. Once we engaged with them, we found additional synergistic benefits to the partnership. Their like-minded vision and values would make a worthy partnership. Introducing the two and highlighting their shared values as well as allaying their concerns was necessary at an early stage of engagement.
For the international acquirer, who had no prior acquisition history with South African, their concerns around B-BBEE and ownership structures had to be demystified. For our client, understanding the intention of this large multinational and their role in the over-arcing strategy was important to protect their culture.
Once the two parties met and unpacked their own visions, they found pertinent similarities that spoke to their deep-rooted core values, beliefs, and legacies. Their shared beliefs and commitment to socio-economic change and education were so aligned, that each had a policy with their own funds driving this agenda.
Apart from the commercial benefits of a partnership, both entities share a common vision for growth that promises a smooth transition, shared values and common goals.
For our client, the buyer brings the following to the table:
The ability to elevate the business profile
Access to new markets
Resources to unlock wealth and financial returns
The benefits to the buyer are:
Access to cheaper raw materials
Lower manufacturing and labour costs
Access to new markets and expanding those markets in Africa
Once the initial introductions were complete, the prospect made a trip to South Africa to meet the client and visit the production plant to examine capacity and the overall business. It was a successful meeting where both strategic and operational-level discussions were held, and synergies and fit were confirmed. The due diligence process is set to begin in the new year.
For us at Deal Leaders International, it is not about making any deal but the right deal. The fit and synergies must be aligned. In this instance, our client is looking for a partner in their business, so the relationship post-transaction is especially important. We, therefore, ensure that hurdles are overcome earlier in the process to avoid potential issues at the transition or implementation stage.
It's critical for us to facilitate the building of trust as a solid foundation for the future partnership to succeed. Because a healthy business relationship is built on unwavering trust. The success of a deal post-transaction is just as important to us as the deal itself. We want to see our clients' businesses grow. Signing on the dotted line is not the end; it is just the beginning.
About the author, Janine Wright
Janine is a Deal Associate at Deal Leaders International. She holds a Bachelors degree in Business Administration and is a qualified Chartered Global Management Accountant. She has extensive experience in financial services having worked in banking, development finance, venture capital, structured finance and impact funding. During her career, she has held various operational and strategic roles having served as a non-executive director on several Boards in both Botswana and South Africa.