When the JSE was founded in 1883, the first merger wave in the US was already underway, triggered by a severe economic downturn…
When the JSE was founded in 1883, the first merger wave in the US was already underway, triggered by a severe economic downturn. Characterised by widespread consolidation of manufacturing businesses, most, if not all, of these merger transactions, were financed by cash. This peak in merger activity slowed down considerably following the enactment of anti-trust laws and the crash of the New York Stock Exchange in 1907.
Over time, more merger waves arrived and dissipated as the economic and political climate evolved. Numerous corporate actions were triggered by the impact of wide-reaching wars, recession, economic and regulatory shocks, globalisation, and the need to eliminate inefficiencies within newly restructured businesses. Against this backdrop, a shift to cash and debt financing and emergence of leverage-buyouts became more pronounced.
While present day corporate transactions are to a lesser extent impacted by wide-reaching wars, the rest of the triggers mentioned above remain prevalent and have been compounded by the effects of technological advancements, an unprecedented pandemic and the emergence of innovative business models such as Uber, Airbnb and Lime. These have added further complexities for the corporate advisor.
Bearing this in mind, their role has had to adapt to these changing circumstances. Mergers and acquisitions are no longer only centred around realising attractive growth prospects and stable cash flows but require differentiated insights that can unlock value that is not always visible to the naked eye but is of operational and strategic value i.e., digital transformation, corporate carve out and deep value turnaround. Further considerations that need to be taken into account are the impact the transaction will have on an organisation’s ESG practises and the regulatory framework that the entity operates in.
In summary, the corporate landscape has, and will continue, to change considerably. Accordingly, the approach and thinking around the deal making process will have to be modified to reflect the changes in a particular organisation’s market – the impact e-commerce has had on the retail property sector is a prime example of this.
How can we help?
Tamela Holdings is a Corporate Advisor and Sponsor business with extensive market experience. Tamela has the expertise to assist you in navigating merger and acquisition transactions from cradle to grave. To the extent that you may be interested in exploring your strategic rationale for an M&A deal and require guidance on the process and considerations, Tamela will be at your service.
For more information, please contact Tshepisho Makofane, 083 287 2651 / Tshepisho@tamela.co.za