Mergers and acquisitions during Covid-19: a real headache


Observers are unanimous that the Covid-19 pandemic has brought business contracts on the continent to a grinding halt. Above all, it is likely to have disastrous consequences on deals, their execution, and price levels. We must therefore be prepared for a complete upheaval.

The Covid-19 pandemic has not only plunged the continent into health concerns. For several weeks now, the economic climate has been deteriorating sharply, particularly with regard to investments and M&As. Nigerian Toyin Sanni, CEO of Emerging Africa Capital Group, which advises and finances investors, describes it as follows: “This particular context has brought us into a period of waiting, of “wait and see” when it comes to signing off on transactions. In Nigeria, some operations at major oil and gas companies have been postponed, while others have simply been cancelled.”

Director at ASAFO and Lawtons in South Africa, Riëtte Engels-Van Zyl supports Toyin Sanni’s analysis. “We have also seen our customers adopting a waiting position, with some deals already postponed.


“Because of Covid-19, we are being even more selective in our investments, with the desire to have as much transparency as possible in the transactions.” Sofiane Lahmar, Partner at Development Partners International (DPI) 

Due diligence procedures affected 

Concluding a merger or acquisition requires lengthy checks known as due diligence. In light of the current crisis, Esther Omulele, Managing Partner at MMC ASAFO, insists that this step has become even more important. “Investors and their consultants have to really determine what the bottom line is for the company they’re targeting. Will they be the same as they were before Covid? What will the impact be? Will customers still be able to afford or access the company’s services? Questions also need to be asked about factories’ production capacities and the supply chain.”

Toyin Sanni goes even further. “The value of an asset is based on past returns, stock, and future projects. However, pre-Covid yields don’t mean much anymore in the current period. Customer behaviour has also changed with the crisis, and the future is very difficult to define.”

“Working from home on due diligence is difficult, traveling is difficult. If I had to give a more favourable period for business, I think it would be next year.” Miguel Azevedo, Head of Investment Banking – Middle East, Africa, Citibank

What about purchase price? 

The Covid-19 crisis has had a profound effect on the economic situation since March. For Esther Omulele, an impact on prices should be expected. “Taking into account the effects of the crisis, future earnings are less secure, and buyers’ offers are also likely to be down,” she said. “Payments will depend more on the level of returns over time. Also, they will have to be reviewed in the light of current risks.”

Although Riëtte Engels-Van Zyl also expects a fall in prices, the outlook is not altogether clear: “It all depends on the industry in which the investment is made. The real impact will be measured over the next 12 or 18 months.”


But opportunities remain 

Nevertheless, the current period is not entirely without interest for investors. Sofiane Lahmar, a partner at Development Partners International (DPI), finalised in March a $55m investment in the Tunisian agro-industrial company SICAM (tomato processing). The deal, discussions around which began nearly a year ago, was concluded last month in the midst of the crisis. “In our minds and in this Covid-19 era, agribusiness is one of the few more resilient industries. In times of crisis, people eat a lot of food. Also, we felt that this was the time to accelerate international development and to aim for new markets.”

For Lahmar, digital features among the other buoyant sectors, especially distance learning and retail.

“When you look at the last financial crises, it took between 24 and 30 months for the markets to return to their pre-crisis situation”Fred Murimi, Managing Partner at Centum Capital 

The conditions for recovery

With Covid-19, the African economy has entered an era of uncertainty. Miguel Azevedo, Citigroup’s Head of Investment Banking for the Middle East and Africa, outlines the five conditions required to jump-start Africa’s economic machine: “A functional global economy with restored supply chains, a stable framework for the solvency of African debt, solid industrial and economic policies, a fund created by the world’s major economic blocks, and finally a sufficient number of successful investors.”


Check out the presentations from our experts, Miguel Azevedo and Esther Omulele:

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