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Value of M&A transactions involving sub-Saharan Africa the highest since 2013

Sneha Shah, managing director for Africa at Thomson Reuters

According to estimates from Thomson Reuters, sub-Saharan African investment banking fees reached an estimated US$366.3m during the first nine months of 2017, 6% less than the value recorded during the first nine months of 2016.

Fees from completed M&A transactions totaled $83.3m, 15% down year-on-year, while equity capital markets (ECM) underwriting fees fell 9% to $124.6m, and syndicated lending fees also declined, falling 43% from this time last year to $68.2m.

Sneha Shah, managing director for Africa at Thomson Reuters, said: “Fees from debt capital markets (DCM) underwriting, on the other hand, saw an increase from $33.3m during the first nine months of 2016 to $90.2m during the first nine months of 2017. This is also the highest value attained from DCM underwriting since our records began in 2000.”

DCM underwriting fees accounted for 25% of the overall sub-Saharan African investment banking fee pool, the highest first nine months share since 2003. Completed M&A and ECM generated 23% and 34% of the total fee pool, respectively, while syndicated lending fees accounted for 19%.

Morgan Stanley earned the most investment banking fees during the first nine months of 2017, with a total of $33.8m or a 9.2% share of the total fee pool.  They also topped the completed M&A fees ranking while Java Capital leads the equity capital markets underwriting fee ranking and Citi the debt capital markets underwriting fee ranking with a 14.3% share. Credit Suisse ranked first for syndicated loans fees.

The value of announced M&A transactions with any sub-Saharan African involvement reached $24.1bn during the first nine months of 2017, the highest since 2013.

“Inbound M&A reached a four-year high of $12.2bn, with the United States, the United Kingdom and France leading investments,” added Shah. “However, domestic and inter-sub-Saharan African M&A totaled $4.8bn, down 0.5% year-on-year – and outbound M&A declined 56% to $3.9bn during the first nine months of 2017 as well.  Interestingly, though, South Africa’s overseas acquisitions accounted for 83.4% of sub-Saharan African outbound M&A activity, while acquisitions by companies headquartered in Mauritius and Seychelles accounted for 11.3% and 5.2%, respectively.”

Exxon Mobil Corp. agreed to buy a 25% stake of a Mozambique liquefied natural gas project from Italy’s Eni SpA for $2.8bn. The deal was the largest to be announced in the region during the first nine months and helped boost the value of deals in the energy and power sector to $6.4bn.

In ECMs, sub-Saharan African equity and equity-related issuance stood at a year-to-date all time high totaling $8.5bn during the first nine months of 2017, up 39% from the same period in 2016. While the Barclays Africa Group follow-on offering still tops the ECM deal list, the Steinhoff Africa Retail Ltd IPO raised $1.2bn and stands as the second largest deal for year-to-date ECM issuance, followed by the Vodacom Group and Sibanye Gold follow on offerings as the three top deals for Q3 2017.

Follow-on offerings accounted for 68% of the ECM activity in the region by value, while IPOs and convertibles accounted for 15% and 12%, respectively. Morgan Stanley topped the sub-Saharan African ECM league table during the first nine months of 2017 with a 21.4% share of the market.

Sub-Saharan African debt issuance raised a total of $21.9bn in proceeds during the first nine months of 2017, up 27% from the value recorded during the same period in 2016. South Africa was the most active issuer nation with $7.6bn in bond proceeds, which accounted for 34.8% of market activity, followed by the Ivory Coast and Nigeria.

Citi took the top spot in the sub-Saharan African bond ranking for the first nine months of 2017 with $3.6bn of related proceeds, or a 16.8% market share.

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