• Service: Advisory
  • Type: Business and industry issue
  • Date: 5/31/2011

The Seventh Wave of M&A 

Mergers, acquisitions, distressed divestments, spin-offs, demergers, management buyouts, reverse mergers, leveraged buyouts, vertical integrations, hostile takeovers... The list goes on.

Transaction advisors around the world have these terms programmed into their vocabularies like the generation ‘Z’ youth of today have Facebook and twitter programmed onto their Smartphones.


However, lately there is a new term being used by Transaction Advisors across the globe - ‘African M&A’.


The evolution of M&A


M&A has been around since the late 1800’s, driven by prevailing business growth imperatives.


Waves Period Facet
First Wave 1893 – 1904 Horizontal mergers
Second Wave 1919 – 1929 Vertical mergers
Third Wave 1955 – 1970 Diversified conglomerate mergers
Fourth Wave 1974 – 1989 Co-generic mergers, hostile takeovers, corporate raiders
Fifth Wave 1993 – 2000 Cross border, mega mergers
Sixth Wave 2003 – 2008 Globalisation, private equity, shareholder activism

Source: York University


The First Wave was one of major horizontal mergers, creating the principal steel, telephone, oil, mining, railroad and other giants of the manufacturing and transportation industries in the United States (US). This wave ended due to the start of World War I.


The Second Wave saw further consolidation in the principal industries formed by the First Wave. This Second Wave saw the rise of major automobile manufacturers such as Ford and FIAT. The 1929 crash and great depression ended this era.


The Third Wave was one of expansion and diversification, where US corporate management were obsessed with entering new markets. These conglomerates then experienced a crash in their share prices during the early 1970’s which consequently ended this era.


The Fourth Wave was an era of highly leveraged takeovers. Large investment banks facilitated a number of 'hostile takeovers' on behalf of their corporate raiding clients. This era ended with the collapse of banks’ capital structures, due to aggressive lending activity to fund these types of transactions.


The Fifth Wave was the era of the ‘mega deal’. This era emphasised appetite for larger economies of scale and created multinational conglomerates of unprecedented sizes, under the assumption that competitive advantage was achieved through size. From a modest US$342 billion of M&A deals in 1992, the volume of M&A marched steadily upward to US$3.3 trillion worldwide in 2000. Six of the 10 largest deals in M&A history took place from 1998 to 20001. This era ended with the bursting of the millennium bubble and the great scandals of companies like Enron and Worldcom.


The Sixth Wave saw the introduction of globalisation, as established corporate companies emphasised the need to create a multi-national reach. Private Equity boomed as shareholders looked to spread ownership of their companies between themselves, day-to-day management and institutional investors.


What about the Seventh Wave?


From 2008 to 2010, M&A activity sank to its lowest levels since 2004, due to the economic downturn.


Is 2011 the beginning of the Seventh Wave? Could it be perfectly termed ‘The rise of the BRICS’?


South Africa’s recent acceptance into the elite league of the world’s best emerging economies was received with both praise and criticism. There are various opinions that Africa as a continent is better placed for membership to the BRICS (Brazil, Russia, India and China) versus South Africa as a single country. However, the inclusion of South Africa, or Africa as a whole, is expected to boost incoming investment and supercharge the M&A sector in Africa.


African M&A in action


With a population close to one billion on the African continent today and an expected population of two billion in 2050, Africa’s consumer markets are set for optimistic growth.


It’s no wonder the largest company in the world by annual US dollar revenues2 and the 14th largest overall company in the world by market capitalisation3 has decided to establish a presence on the continent. Walmart has offered approximately R16 billion for a 51% stake in Massmart Limited.


Nippon Telegraph and Telephone Corporation of Japan (NTT) acquired 100% of Dimension Data Plc’s equity for a staggering £2.1 billion, thereby gaining access to Africa’s constantly growing market for new and upgraded IT infrastructure.


Head of Bharti Airtel’s international operations, Manoj Kohli, said “Africa has more potential than India.” Bharti Airtel spent a record-breaking US$10.7 billion to acquire the African assets of Zain, the Kuwaiti telecoms provider and suggested a further US$2.5 billion in investment over the next three years. This particular M&A deal was among the 15 largest M&A deals in the world during 20104.


Unprecedented surge in African M&A


South African M&A activity made a good recovery in 2010, up 133% from 2009 to US$15.7 billion - the highest since 2008. This substantial improvement was due to large cap deals, totalling US$11.5 billion5.


Thomson Reuters data indicated that M&A activity in Africa surged to a record US$53 billion for the year ended 31 December 2010. This represents an increase of 69% on the 2008 year, which was considered the best year for African M&A by deal value in history. More developed economies have yet to reach the records set during the boom years of 2007 and 2008.


Total worldwide M&A activity for 2010 totalled US$2 434 billion and African M&A made up 2.2% of that number. This compares to 1.4% in 2009 and 1.1% in 2008. This is strong evidence pointing towards further growth in M&A activity on the African continent.


1 Institute of Mergers, Acquisitions and Alliances
2 Fortune 500 top companies by revenue published in July 2010
3 Financial Times Global 500 companies by market capitalisation at 31 December 2010
4 Thomson Reuters Full Year M&A Report for 2010
5 Mergermarket South African M&A Round-Up for year ended 31 December 2010



Nick Matthews
Transactions & Restructuring
Tel: +27 (0)11 647 5331