What do Mergers and Acquisitions in Zimbabwe tell us about business building and the current investment landscape?
Between 2009-2021 there were nearly 80 publicly disclosed transactions, spanning 20 different sectors, here’s what I learned:
[A thread] 🧵 🧵 🧵
Between 2009-2021 there were nearly 80 publicly disclosed transactions, spanning 20 different sectors, here’s what I learned:
[A thread] 🧵 🧵 🧵
1. I carried out this study after my internship at a Sub Saharan Africa-focused Private Equity firm with exposure to Zimbabwe. The key objective was to understand what the exit environment looked like for the firms' investments but also for the broader investor community.
2. All of the primary data in this study was sourced from the Competition and Tariff Commission, through various reports from 2009 to 2021.
The Commission has a mandate to promote and maintain competition in the economy of Zimbabwe. It is also in charge of merger control.
The Commission has a mandate to promote and maintain competition in the economy of Zimbabwe. It is also in charge of merger control.
3. The study was focused on trying to quantify and understand three main elements. Firstly, the sectorial distribution of transactions, secondly, the average stake/size acquired in each transaction, and lastly the ‘type’ of M&A being carried out.
So, what did I learn?
So, what did I learn?
4. HOL' UP!
Firstly, let’s get some housekeeping out of the way. In Mergers and Acquisitions (M&A), there are broadly three types of transactions. These are, Horizontal, Vertical, and Conglomerate.
Let's break down each of these👇👇👇
Firstly, let’s get some housekeeping out of the way. In Mergers and Acquisitions (M&A), there are broadly three types of transactions. These are, Horizontal, Vertical, and Conglomerate.
Let's break down each of these👇👇👇
5. Horizontal transactions are between companies that directly compete with each other.
Vertical transactions are between companies that are not competitors but operate along the same supply chain.
Conglomerate transactions are between companies that are totally unrelated.
Vertical transactions are between companies that are not competitors but operate along the same supply chain.
Conglomerate transactions are between companies that are totally unrelated.
6. Now that we’ve got that cleared let’s get into the data!
7. Sectoral distribution: Of the 75 deals analyzed, the sectors which generated the most M&A activity were Manufacturing (incld. Agro + Light) with 13 deals, Banking with 8 deals, and Retail at 6 deals.
The top three sectors accounted for 36% of the deals analyzed.
The top three sectors accounted for 36% of the deals analyzed.
8. Type of M&A: All three types of M&A activity were recorded. Manufacturing was dominated by vertical transactions which accounted for 54% of all the transactions in the sector, Banking and Retail recorded the majority of transactions as horizontal each representing 50% and 66%.
9. Average stake: All three sectors showed a trend towards the acquisition of controlling interests. The average stake acquired across Manufacturing was 67%, Banking 50% and Retail at 70%
10. Notable transactions:
Retail: Takura’s acquisition of Food Lovers Zimbabwe in 2015 and subsequent divestment of 30% to ACTIS in 2016.
Manufacturing: National Foods’ acquisition of Pure Oil and Pro Brands.
Banking: Ecobank’s expansion into Zimbabwe through Premeir Bank.
Retail: Takura’s acquisition of Food Lovers Zimbabwe in 2015 and subsequent divestment of 30% to ACTIS in 2016.
Manufacturing: National Foods’ acquisition of Pure Oil and Pro Brands.
Banking: Ecobank’s expansion into Zimbabwe through Premeir Bank.
11. So what are the lessons? For investors looking to structure exists in an illiquid market like Zimbabwe, it provides insights into which sectors can potentially provide that return on capital and how the transactions are structured.
12. For existing business operations: It provides context on how major competitors are viewing the market and their overall strategic direction.
Further investigation into the nature of transactions, the timing, and the structure can also signal major/minor systematic shifts.
Further investigation into the nature of transactions, the timing, and the structure can also signal major/minor systematic shifts.
13. Lastly: For both biz owners and investors: It provides insights into which sectors are possibly ripe for consolidation or new market entrants.
ex: The beverages sector: It had only recorded one transaction until Varun (Pepsi) entered to compete with Delta (Coke) in 2018.
ex: The beverages sector: It had only recorded one transaction until Varun (Pepsi) entered to compete with Delta (Coke) in 2018.
14. I've open-sourced the #merger #tracking file on Google Sheets for anyone interested in contributing to this body of work!
Ultimately, the more data we can have as a community the better informed our investment decisions will be.
docs.google.com/spreadsheets/d…
Ultimately, the more data we can have as a community the better informed our investment decisions will be.
docs.google.com/spreadsheets/d…
15. I hope you enjoyed this thread, feel free to follow me as I grow in my journey as an investment professional.
I'm also happy to connect via LinkedIn!
LinkedIn: linkedin.com/in/tadiwa-dzud…
I'm also happy to connect via LinkedIn!
LinkedIn: linkedin.com/in/tadiwa-dzud…
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