Unblocking African deal flow: a new technology platform hopes to streamline mergers and acquisitions in Africa.

Author:Matthews, Chris
Position:Capital
 
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An influx of private equity money and rapid economic growth has driven a surge in African mergers and acquisitions in the continent over the past few years. In the first nine months of 2014 alone, the value of transactions topped $19bn, according to Mergermarket--and yet investor and advisor Sean Obedih found that deals were often hard to arrange.

"It became very clear that the process of acquiring a company in Africa is very difficult largely due to the fact that most owners don't want to sell--or simply that they lack proper bookkeeping practices," says Obedih, who set up a small, Africa-focused fund of funds vehicle in 2013.

After being approached by recent MBA graduates Ade Odutayo and Nick Engelking--who were trying to start a fund--Obedih joined them to launch a platform that gives potential investors a "soft landing" into the African M&A market, and which offers African enterprises an outlet to find potential acquirers or partners.

The result, MergersAfrique, aspires to "create a pipeline between the sellers, the buyers and the advisor community," Obedih says.

Businesses looking to sell their firm can advertise on the site, and investors pursuing African mandates can browse the potential businesses and start conversations at the click of a mouse. The platform will initially focus on mid-market companies in the $5-50m range.

"Those are the ones that are not really using technology at all, everything is still face-to-face negotiations," Obedih says.

As Dorothy Kelso, head of research and strategy at the African Private Equity and Venture Capital Association, says, investors are increasingly searching out deals in Africa, in some cases making their first forays, and in others looking to exit deals made earlier in the decade.

"M&A activity has benefited from increased recognition of the tremendous opportunities that Africa presents to investors," she says.

"The continent continues to have relatively strong economic growth by global standards, a general trend towards democratic governance across the continent, a young and growing population and an emerging middle class."

However, experts warn that the actual process of arranging and finalising deals in Africa can be very high-touch and expensive.

Difficulties obtaining documents, up-to-date company information and relevant business data can make the due diligence process a challenging one for investors.

"If you were buying a business in Kenya, for example, the due diligence would...

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