Historically in Africa ex SA, higher-priced transactions tended to take place at the larger end of the deal size spectrum. However, a shift has been noted for African ex SA companies, in that regardless of the price range, the median EV/EBITDA multiples ranged from 5.4x to 8.7x.
For South African companies, following a change in trend observed pre-2015, with higher multiples for deals above USD100m, the higher multiples are now seen predominantly in the USD25m–USD100m category. This has been relatively consistent over the current three-year period versus the prior three years. Notably, multiples within the smaller price range (<USD25 m) declined 21% over the reporting periods by June 2021.
An interesting observation is that we see a higher correlation between the deal size and multiples, in line with international norms, in Africa ex SA versus South Africa alone, particularly in the more recent periods.
The average deal size in South Africa and Africa ex SA between July 2018 and June 2021 was USD18.97m and USD11.98m respectively, with corresponding average multiples of 5.56x and 7.77x. Comparatively, between July 2015 and June 2018 the average deal size in South Africa and Africa ex SA was USD31.8m and USD54.95m respectively (or USD36.43m, excluding a USD4bn outlier in 2017 from Milost Global Inc Fund towards energy and water investments in Western Africa) with corresponding average multiples of 6.44x and 9.38x.
While smaller transactions in South Africa have maintained a relatively consistent median EV/EBITDA multiple across the periods, the median EV/EBITDA multiple for transactions occurring between the USD25m – USD100m price range has almost doubled from the illustrated three-year period ended June 2015 to June 2021.
South Africa’s macro-economic headwinds may have made larger companies that are broadly exposed to the country’s economy less attractive than smaller firms that can operate in more niche areas.
Quantitatively it is notable that most transactions in South Africa are occurring in the under USD25m price range, followed by the USD25m – USD100m price range. Africa ex SA still has considerable transactions within the USD100m – USD250m price range. This indicates that larger trades are being executed beyond South Africa’s borders.