Shirleen Ritchie is a partner in Webber Wentzel’s tax business unit, with expertise in mergers and acquisitions (M&A). In this conversation, she talks to Chipo Muwowo about recent African M&A activity, the impact of the pandemic on company decisions, and a R41 billion ($2,7 billion) deal she recently worked on.
2021 was a record-breaking year for global M&A. According to Mergermarket, the market intelligence specialist, globally deal value exceeded $1 trillion in every quarter for the first time in history. Africa experienced growing momentum too.
“There has been a lot of activity in Africa especially following the worst periods of the pandemic,” said Ritchie, a partner at leading South African law firm Webber Wentzel. “We’ve seen a lot of movement in fintech and green energy. And, as usual, African infrastructure funds remain attractive from a funding perspective.”
Companies that were flush with cash also started picking up assets where values had dropped as a result of the pandemic. Across the continent, countries like South Africa, Kenya, Ethiopia, and Nigeria remain important to the African M&A story. But Ritchie also notes “a slight uptick in smaller West African economies too”, a trend she describes as “interesting and enlightening”.
Within retail, big South African players have continued with their expansion into the rest of the continent. “It’s been interesting to watch how retailers are engineering new ways of doing business,” she says. “Some are trying to compete with Uber Eats and other delivery platforms. This opens up a lot of opportunity where you could use a supermarket hub for delivery to suburban markets.”
The pandemic also enabled companies to look introspectively. “There has been a lot of restructuring around debt and employee share schemes,”Ritchie commented. “We also saw a lot of consolidation and a reduction in leveraging positions. Companies were also using cash to retain employees and survive the pandemic.”
The M&A and corporate tax team at Webber Wentzel serves predominantly South African corporates, and global multinationals seeking to enter the South African market. The team was involved in one of the most exciting M&A deals of the year: Vodafone’s R41 billion transfer of its 55% shareholding in Vodafone Egypt to Vodacom Group Limited. The deal won Deal of the Year at the recent DealMakers SA Awards.
While Webber Wentzel is firmly rooted in South Africa, it also enjoys excellent relationships with in-country specialists in other African countries. This alliance and network model includes jurisdictions such as Mauritius, Kenya, Tanzania and Nigeria.
When it comes to structuring deals, Ritchie believes that it’s always important to understand as much about the client’s business as possible. “A mining client has vastly different needs to a client looking to set up a wind farm,” she observed. Asking the right questions then informs the right approach to different facets of the deal, including tax structuring.
Commenting on tax attractiveness, she says it’s time to change the narrative. “The number one priority for businesses, from a tax attractiveness perspective, is policy certainty. It becomes very difficult to determine your return on investment if the tax laws either change or are applied in an unpredictable manner.”
And there is hope. Given the increased presence of complex commercial activity, and more multinationals entering their markets, many tax authorities are learning this policy lesson.
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