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80% of investors expect M&A increase in next 2 years- KPMG

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Nigeria is turning out to be an investment heaven, as 80 percent of despondence comprising of foreign and local investors, surveyed by KPMG Advisory Services, expect Mergers and Acquisition (M&A) activity in the country to increase over the next two years.  

KPMG on Wednesday released its latest report on doing deals in Nigeria 2019, which show that 56% percent of the respondents are envisioning activity to increase significantly and 62 percent are considering an acquisition in Nigeria over the next two years.

Dapo Okubadejo, partner and head, deal advisory and private equity, KPMG in Nigeria, explained that in Q3 2018, 50 senior business executives were surveyed, based on their experience of deal making in Nigeria.

Experience tends to breed a level of confidence in Nigeria’s M&A market as 78 percent of respondents say they are more likely to invest in Nigeria as a result of their previous M&A experience in the country, while almost half (48%) further said they are now significantly more likely to invest in the country as a result.

“We have seen the success of the previous deal and understand that there are certain niche business opportunities in the country,” says an Europe, Middle East, and Africa (EMEA) based managing director of a private equity firm.

Speaking at the official presentation of the report in Lagos, Ijeoma Emezie-Ezigbo, partner, deal advisory, KPMG, said in 2018, the consume sector saw a boost in M&A activity over the previous two years, with consumer deals accounting for 33 percent of Nigeria’s total M&A value in 2017 and 2018 combined, compared with 21 percent in 2015 and 2016 combined.

“And this situation looks set to continue as three-quarters of respondents agree that the consumer sector will be the country’s most  attractive sector for M&A over the next two years”, she said.

Financial services was named as the second most attractive sector for Nigerian M&A over the next five years, with 40 percent of respondents citing this as producing attractive investment opportunities. It is estimated that only 40 percent of Nigerian adults have an account with a financial institution or a mobile money provider, leaving significant headroom for growth.

“Notwithstanding, the country is not without its challenges. Lower reporting standards can prove to be an obstacle for some acquirers, as many private businesses in Nigeria are not subject to full-scale financial audits”, Okubadejo.

He added that “the survey responses and insights herein demonstrate that experienced local advisors, with an understanding of Nigeria’s regulatory and legal complexities and cultural sensitivities, are necessary in what continues to be one of the most promising M&A markets in Africa”.

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