2022 an unusual year for mergers, acquisitions
The year 2022 was a busy year for mergers and acquisitions with the Competition and Tariff Commission describing it as an unusual year.
According to the Competition and Tariff Commission (CTC), which is mandated to implement the country’s competition policy, including mergers and acquisitions (M&As), economic activity as represented by M&A tends to slow down in the years ahead of elections.
But the year 2022 was an unusual one as it turned out to be a busy one for the CTC.
This is after the country recorded M&As worth more than US$1 billion in year to December 31, 2022, according to the CTC in Newsletter for the fourth quarter to December 2022.
Assessed and made decisions on 24 M&As with a cumulative purchase consideration valued at US$1,024 billion, said the
CTC.
The CTC described the high volume of transactions as unusual “as historically, the Commission handles fewer transactions in a year prior to a general election”.
“Possible reasons explaining the increase in transactions volumes during the year include Government policies that improved macroeconomic stability and increased investor confidence,” said the CTC.
The CTC also attributed the strong performance to Government’s efforts “to create a stable macroeconomic environment, and its policies towards re-engagement.”
In terms of sectoral distribution of the transactions, the manufacturing sector dominated followed by mining, agriculture, information and communication and transport and storage sectors.
According to the CTC, Government’s vision towards building a US$12 billion sector by 2023 led to increasing in mining mergers as foreign investors bought local mines.
About 54 percent of the merger transactions involved domestic firms acquiring other local firms as the target firms sought to raise funds.
The CTC said it witnessed increased merger activity involving foreign companies acquiring local companies.
Of the total M&As, 46 percent involved local firms being acquired by foreign firms.
Five countries were involved namely China, Hong Kong, Mauritius, United Arab Emirates and South Africa. South African firms dominated foreign firms acquiring local firms, indicating the strong economic and trade relations between Zimbabwe and South Africa.
However, in 2023, the CTC anticipates the year to slightly less busy given that it is an election year.
“Local investors who have acclimatised with the Zimbabwean economic environment are (however) likely to continue investing in acquiring other companies as what happened in 2022.”
In terms of anticompetitive practices investigations, the Commission anticipates that 2023 will be a busy year again as more firms are likely to report such practices given the advocacy work carried out by the Commission in 2022.
While high volumes of mergers and acquisitions are that high, it also increases concern about industry concentration and its negative effects.
However, the CTC approved some of the M&As subject to certain conditions to prevent anticompetitive practices.
“Notwithstanding limitations imposed by the current Competition Act, the Commission made significant steps towards investigation of anticompetitive practices.
“This resulted in orders being registered against some firms which violated the provisions of the Act,” said the CTC.
One of the conditions to approve the acquisition of First Mutual Holdings was that CBZ Holdings, its affiliates and its successors in title will have to allow its subsidiaries and those of FMHL to continue operating as separate entities.
On the other hand FMHL, its affiliates and its successors in title were also expected to continue operating on non-discriminatory terms and conditions.
One of the conditions to approve the acquisition of Charles Stewart Day Old Chicks by Shanksville Farming, was for the former to continue to supply layer day-old chicks to its customers on non-discriminatory terms and conditions that include inter-alia prices, quality and delivery terms.-ebusinessweekly
