Mergers and acquisitions show recovery – The Zimbabwe Mail

MERGERS AND ACQUISITIONS (M&As) in Zimbabwe are recovering as local and foreign investors strategically consolidate to reposition for growth, recapitalisation and resilience.

Following a slump between 2021 and 2023, the M&A market steadied in 2024 with 14 mergers.

Of the mergers considered, 10 were unconditionally approved, three were granted conditional approval and one was prohibited.

According to the Competition and Tariff Commission (CTC), these decisions were informed by a comprehensive review process that prioritised stakeholder input and public interest considerations such as job preservation, industrial productivity and consumer welfare.

While the past trend involved companies demerging as a way of unlocking value, current economic headwinds are forcing companies to streamline costs as a survival strategy.

It is believed mergers can help firms combine their strengths and streamline costs, among other benefits.

The consolidation of businesses ordinarily results in synergies that increase the value of a newly created entity.

Essentially, synergy means the value of a merged company exceeds the sum of the values of two individual companies, either through the firm’s revenue-generating ability or through a reduction of its cost structure.

CTC’s first-quarter newsletter indicates that local-to-local merger transactions dominated, at 43 percent.

These mergers largely involved domestic firms seeking to pool resources, cut costs and increase market share amid an operating environment characterised by liquidity constraints and rising input costs.

“In relation to the distribution of mergers by domicile, 43 percent of the transactions were between local-to-local parties, 36 percent were between foreign and local parties, and 21 percent were between foreign-to-foreign parties,” said the CTC.

“This composition reflects both domestic economic priorities and the country’s integration into regional and global markets.

“The dominance of local-to-local mergers underscores the resilience and consolidation efforts within Zimbabwe’s domestic market . . . These transactions, more often than not, reflect strategic realignments by local firms seeking to pool resources, achieve economies of scale and enhance their competitiveness.”

Business strategist Mr Busani Malaba said local-to-local mergers are a “critical pathway to industrial transformation” in the current economic environment.

“These transactions indicate that Zimbabwean firms are not just waiting for external capital but are proactively seeking ways to survive and scale through internal synergies,” he said.

“They foster resilience, preserve ownership within the local economy and provide a practical route for firms to expand capacity, retool operations and compete more effectively in both local and regional markets.”

Foreign-to-local mergers accounted for 36 percent of transactions, underscoring sustained international interest in Zimbabwe’s resource-rich economy and emerging consumer base.

These transactions typically involved capital injections, technology transfer and technical capacity-building, all of which are critical enablers of long-term business sustainability.

“The share of foreign-to-local mergers reflects the strategic interest of foreign investors in leveraging Zimbabwe’s resource base and untapped market potential. It concurrently underscores the need for robust regulatory frameworks to ensure that such transactions align with public interest objectives, such as employment preservation, technology transfer and constant foreign direct investment (FDI) inflows,” the commission noted.

Mergers, CTC added, provided much-needed funding for recapitalisation and efficiencies.

“Other transactions ushered in significant technical expertise and economies of scale to operations, while others accorded foreign companies opportunities to expand their regional presence. Some joint ventures resulted in job creation and FDI inflows, thereby attracting much-needed capital into Zimbabwe.”

Foreign-to-foreign mergers represented 21 percent, a notable indicator of Zimbabwe’s increasing integration into regional and global supply chains.

More than transactional value, many of the mergers in 2024 served as crucial instruments of economic revitalisation, the CTC noted.

In the manufacturing sector, some companies found new life through mergers that enabled recapitalisation and retooling.

These deals helped prevent production halts, allowing firms to meet demand and fulfil both domestic and export orders.

Data shows that manufacturing and financial and insurance activities each accounted for 22 percent of the total merger activity in 2024.

These sectors were driven by consolidation strategies focusing on capital mobilisation, process efficiency and market expansion.- Sunday Mail

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