Mergers and acquisitions activity in sub-Saharan Africa surged to a record $44 billion in 2010, double the value of a year earlier, Thomson Reuters data showed on Wednesday. Investors and analysts expect the pace of deals can only increase in 2011, as more overseas corporates and banks target the continent's rapidly expanding economies, growing middle classes and rising trade flows with Asia.
While deal activity spiked across the region, total fees reaped by investment banks declined by 15 percent, as stiff competition put pressure on margins. J.P. Morgan Chase & Co edged past rival Morgan Stanley to take the top spot for overall investment banking fees, raking in $21.4 million in the region, thanks to participation in Wal-Mart's bid for South Africa's Massmart, as well big equity and debt issuances.
Now home to about 1 billion people, Africa is expected to see its population double by 2050. Some of its frontier economies boast growth rates of 7 percent or more. Globally, announced M&A deals totalled $2.2 trillion for the year, the data showed, rising for the first year since 2007. Emerging markets deals hit a record $378 billion. The chief executives of both Citigroup Inc and J.P. Morgan have recently visited the continent to stress their interest in winning Africa deals.
M&A fees, historically the biggest contributor to total investment banking activity, accounted for just under 50 percent of all fees, the lowest since 2007 and evidence big banks are doing a wider range of deals. The biggest M&A deal was Indian telecom Bharti Airtel's $10.7 billion acquisition of the African assets of Kuwait's Zain. Likewise, Japan's Nippon Telegraph and Telephone paid around $3 billion for South African IT firm Dimension Data, as the fixed-line operator looks for opportunities beyond its shrinking domestic market.