THE Competition and Tariff Commission (CTC) made decisions on 16 local merger transactions in 2023, with a cumulative purchase consideration value of US$201,5 million, businessdigest can reveal.
Twelve transactions, according to the latest CTC report, were given the thumbs up without conditions, while three were approved with conditions and one transaction was prohibited.
In comparison to the 2022 operating period, the report noted that merger activity was slightly subdued in the 2023 reporting period. In 2022, the commission made decisions on 21 mergers indicating a 31% decline in finalised merger transactions.
“The main reasons for the mergers included restructuring, rescuing failing firms, operations consolidation, recapitalisation amongst others,” the report reads in part.
The mergers handled were mostly in the manufacturing sector at 56%, which includes production of fast-moving consumer goods (FMCGs), metal fabrication, aftermarket auto body parts, dairy related products and fertiliser raw materials.
Wholesale and distribution accounted for about 19%, comprising merging parties in the wholesaling and distribution of fuels and FMCGs.
“Some of the rationale for mergers in the wholesaling sector was to provide capital injection for the purpose of growing retail assets across the country,” it said.
“The agriculture sector had 13% of the merger transactions and similar to the wholesaling arena players intended to merge to undertake investment partnerships for the purposes of improving business performance.”
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The financial and insurance activities sector had 12% of the merger transaction.
The CTC noted that the financial and insurance activities sector witnessed mergers and acquisitions activities for purposes of meeting capital requirements as well as synergies for ensuring stability of the financial institutions.
On the concluded mergers analysed, 19% of the merger transactions involved foreign parties registered in South Africa and 81% of the transactions consisted of local firms’ consolidations.
“South African firm mergers had an effect on Zimbabwe through sales and had to be analysed on the implication of substantially lessening competition in the local environment. This also goes to show how South Africa is one of our biggest trading partners in the region,” the commission disclosed.
“Local consolidation of firms in many instances was to inject capital to improve business performance to ensure that Zimbabwe has stronger and more competitive local entities with more resources for financing their growth plans.”
The commission anticipates that the second draft of the Competition Amendment Bill would be tabled before the cabinet committee responsible for legislation in 2024.
The commission will be closely monitoring specific industries at the back of El Niño to ensure it proactively handles unfair business practices.
According to PwC, global mergers and acquisitions outlook, mergers are anticipated to increase in 2024, signalling an end to one of the worst bear markets for mergers and acquisitions in a decade.
This optimism is based on the recent improvement in financial markets and the pressing strategic need for companies to adapt and transform business models.
With the commencement of the post-election period, the commission said it is expected that there will be a slight uptick in local mergers.
“Foreign investors, who were previously adopting a “wait and see” approach, are now poised to explore opportunities for acquisitions,” it said.
“Businesses believe that merger transactions in many cases are the best way to keep up with the ever-changing market developments and allow them to transform faster than otherwise feasible.”
Also, as firms continue to realise the changes that are going to come through the African Continental Free Trade Area, the CTC noted that this can also render mergers attractive for firms to reinvent themselves to be able to stay ahead and relevant in this trade integration agenda.
Some of the merger transactions approved by the commission include acquisition of Standard Chartered Bank Zimbabwe Limited by FBC Holdings Limited, as well as purchase of Metro Peech & Browne Wholesalers by Heartgroove Investments.
The CTC prohibited the acquisition of 49% shareholding in Amiata Investments by Ashram Investments.
