Business News of 2014-04-25

Stanbic predicts more mergers and acquisitions

A senior investment banker at Stanbic Bank Ghana has predicted a rise in Mergers and Acquisitions (M&A) activity in the country due to emphasis on local content across sectors of the country.

Randolph Rodrigues, who heads the M&A and Financial Advisory Desk at Stanbic Bank, therefore urged financial institutions in the country to show leadership in advisory services to ensure the development of the nation.

“The renewed quest for the institution of local content requirements across industries is expected to drive a wave of M&A activity, with larger foreign-owned enterprises seeking partnership opportunities with indigenous operations to continue to grow within the legal framework of their respective industries. Banks are well placed to lead the way in advisory services.”

He said as Ghana’s economy continues to expand and mature, more domestic institutions should develop the potential to expand their reach beyond Ghana’s borders and M&A will be key in for securing a broader geographic footprint.

“Most firms that assume debt in their capital structures will borrow money, refinance, restructure and retire loans multiple times during the life of the business, however a typical firm will only execute one M&A transaction – in which it engages a financial or strategic partner. It is therefore critical to solicit capable advisors.

“M&A is a complicated product, and it should be handled by institutions that have this line of business as a core competency. Financial advisors are required to guide their clients through an intricate and detail-intensive process with tremendous impact on the future of clients’ businesses and limited to no room for error or failure,” he said

Even though numerous financial entities list ‘investment bank’ or ‘corporate finance advisory’ among their services, an educated survey of the financial services sector shows that the majority of the transactions executed in the market have been handled by a select group of financial institutions.

Aggressive growth in the financial sector over the past decade has spurred meaningful M&A activity with Ecobank acquiring Trust Bank and Access Bank merging with Intercontinental Bank.

“Further deregulation of the economy will likely entail additional privatisations or government divestment of assets in which it holds non-strategic stakes which presents another avenue for M&A,” he said.