Energy Dominates Nigeria’s $3.2b Merger, Acquisition Deals In 2015

Notwithstanding the dwindling crude oil prices, the energy, mining and utilities sectors championed the merger and acquisition (M&A) deals in 2015, with about 28 per cent share of the $3.2 billion deals.

This volume, according to a new report by Mergermarket, showed a decline in the number and value of deals last year due to regulatory uncertainty, falling oil prices and weakening of the naira, which forced investor’s to take cautions.

According to the report, there were 25 transactions worth a total of $3.2 billion last year, a 22 per cent decline from the number of deals in the previous year (32) and a 65 per cent plunge in the overall value of those deals, from $9.2 billion in 2014.

Detail of the report showed that energy, mining and utilities recorded 28 per cent; consumers (20 per cent); financial service (12 per cent); tech, media and telecommunications (12 per cent); business services (8 per cent), industrial and chemicals (8 per cent); construction (4 per cent); pharma, medical and biotech (4 per cent) and transportation (4 per cent) accordingly.

Meanwhile, Africa is seeing the number of M&A transactions going up, albeit at declining values, with investors choosing to buy into smaller, mid-market companies rather than make deals above the $500 million mark.

The Head of Financial Advisory and Equity Capital Markets at FBNQuest, Afolabi Olorode, said: “Nigeria has been facing some challenges with exchange rates and clamors for devaluation, so we’re probably not as competitive when it comes to outbound deals,”

This, it said has forced investors to look inward for deals. In 2015, nearly half of M&A deals in Nigeria were domestic, with a total value of $1.5 billion. The local energy sector was active, where big energy companies such as Shell and Chevron sold some of their assets to domestic players such as Seplat Petroleum and First Exploration and Petroleum Development Company.

However, the report pointed at indications that investors are also looking for deals in other areas of the economy, such as in tech and consumer markets, reflecting a wider M&A trend on the continent.

“This year should be much better,” Olorode said, adding that, “last year investors were hesitant due to risks associated with the election and the volatility of the naira. We could see an increase of as much as 50 per cent in deal volume.”

Chevron Nigeria Limited had last month formally completed the transfer of producing assets in three oil mining leases to three indigenous oil companies.

These are: Seplat Consortium, comprising Seplat, Amni International Petroleum Development Company Limited, and Delta State-owned Belema Oil.

The three oil leases (OMLs 52, 53 and 55) are reputed to hold oil reserves in excess of 134 million barrels and about five trillion cubic feet of gas, with combined estimated value of an average $500 million and $600 million.