Market report has it that the Nigerian Legal industry may experience a significant profit in 2015, driven by an equivalent rise in the demand for both transactional and traditional litigation work. Many believe however, that a lot of this rise will come from an expected rise in Mergers & Acquisition (M&A).
In 2014, the sub-saharan African region is said to have seen 631 Merger & Acquisition deals, the largest number for a comparable period since 1995 and up nearly 10 per cent from last year, according financial data provider ‘dealogic’. We are told that if M&A continues to flow as it did in 2015, this year could surpass the record set in 2012 with 656 deals.
This record number of deals analysts say, supports the “Africa rising” narrative, of a virtuous circle of healthy growth in the continent’s economies – supported by historically high commodity prices and cheap Chinese loans – and improved governance. For a decade African economic growth has been robust to an extent not seen since the decolonisation cycle of the 1960s and 1970s.
The International Monetary Fund (IMF) also has forecast that Africa will be the second fastest-growing region this year, expanding 5.75 per cent, behind the developing Asian region that includes India and China. By contrast Latin America will expand 2.2 per cent. And although a rout in oil and other commodity prices would damp growth in 2015, optimism still prevails.
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KPMG’s 2015 survey report has it that the boom is back, as Mergers & Acquisition (M&A) reemerges as leading growth strategy for 2015. According to this report, the U.S. is ranked the most popular deal destination. Despite global concerns, deal-makers in the region are said to be encouraged by low interest rates, record stock prices, improving employment numbers and an abundance of cash. Survey respondents mirrored an optimistic marketplace and also indicated they would be active investors in the year ahead.
A graphic analysis of this report illustrates factors that will drive M&A deal activity in 2015. Interestingly, this includes, large cash reserves/commitments (By 40%); Opportunities in emerging markets (by19%); Availability of credit on favorable terms (By16%); Improved consumer confidence (13%); Improving equity markets (By 8%)
Deal advisors maintain that, deals will increase because there is a lot of dry powder and very favorable financing.
According to Abayomi Adebanjo, a finance lawyer, the industry should expect a reduced exposure to oil& gas activities by financial institutions for most of Q1 and Q2 given the slump in oil prices and naira devaluation coupled with non-passage of the PIB hence no fiscal incentive by IOCs for more investment in the sector.
“Nonetheless, I expect activities to rebound later in the year with the possible marginal field licensing round proceeding as well as possible passage of Petroleum Industry Bill (PIB). In my view this year or next is more realistic for passage of the bill given the global downturn and loss in market share by Nigeria there is need to ramp up production,” he said.
Relying on a series of local industry forecasts by legal experts published in our last three editions, the verdict is that the demand for legal services will continue to maintain at stronger levels than they were in 2013 and 2014 and the M&A Market will be a key driver in a number of these activities.
Theodora Kio-Lawson
