DOES the nature and quantum of deal-making signal the health of an economy or rather its recovery potential? Both, probably.
There is definitely a message of sorts coming out of the US right now. Ever since the collapse of Lehman Brothers and the involvement of the US Federal Reserve through those massive dollops of what it quaintly called quantitative easing (meaning to flood the market with money), the US has been awash with cash.
It has not gone to all the places intended, but at least it is beginning to percolate.
And, when that happens, those with eyes on the potential for mergers and acquisitions start getting excited. Things are happening. Investment guru Warren Buffett decided he fancied shaking the odd bottle of tomato ketchup mixed with old-fashioned musical beans. He teamed up with a Brazilian investor to buy the famous HJ Heinz for about $23bn.
Then American Airlines and US Airways figured sharing routes, passengers and fuel bills made sense and merged in a deal valued at $11bn. Michael Dell got fed up with the people running the company he started (Dell), linked up with a private equity buyer and slapped a $24bn buyout plan on the table. Liberty Global, controlled by media billionaire John Malone, put together a $16bn deal to buy Virgin Media.
Those deals alone add up to $74bn and Thomson Reuters reports activity so far this year is getting close to 20% higher than a year ago. It quotes a JPMorgan executive saying all the ingredients for deal-making are in place — cheap finance, companies with cash on their balance sheets and good equity markets.
When I look at that combination and compare it with our own, I find little difference, except in a couple of critical areas. Many of our major companies have cash to spare, the South African equity market has withstood much better than most the vagaries of the past five years, and domestic interest rates are at comparatively low levels.
The essential difference remains confidence. From comments made by President Jacob Zuma during his state of the nation address, alongside plenty of accumulating evidence, the Treasury is scraping the barrel.
Finance Minister Pravin Gordhan is widely expected to raise taxes next week. He shouldn’t, but he will. He has a raft of hungry ministers staring at him.
Raising taxes coupled with high levels of uncertainty do not make for good deal-making. For that matter, they don’t do much for an economy generally. But try telling that to those purveyors of this "developmental" economy the South African Communist Party is so hellbent on foisting upon us — there’s none so deaf as those who will not hear.
Some will argue that the Marikana disaster was evidence of a deep-seated industry problem. As with all of these, there is an element of truth in that. But it also tries to disguise the role government has played over the past two decades during which its actions have combined to leave the industry intensely vulnerable.
Marikana exposed deep fissures in the social contract. Industry executives should have done better — and perhaps they would have, had it not been for the actions of an insufferable, arrogant mines department, for which the government alone bears responsibility.
One outcome, according to BDlive, is that two international bidders for Independent News & Media snapped closed their briefcases and headed for the airport. News Corporation (read Rupert Murdoch) and The Times of India, were apparently interested, but Marikana and all that followed — and all it meant — put a full stop to that.
Given all these circumstances, it would be idle to presume the local merger and acquisitions industry will return soon to the heydays of 2007 and 2008. The economy has to be fixed first, and that’s going to take some doing.
IF YOU are worried about the quality of those entering the legal profession, you have good cause. Those who run the profession are really concerned.
The four-year LLB degree, introduced in 1998, was a response to political pressure to get more black students through the system. It was also believed it would be less costly.
Instead, it has turned out poorly. Of 500 attorneys surveyed last year, only a fifth think the current LLB degree prepares candidates to succeed in the profession. Although there is a good deal of argy-bargy going on about what is right and what is wrong, there is consensus that the new system just does not create the graduates the profession needs. In large part that’s because they leave school unprepared. Writing in the Sunday Independent last year, legal journalist Dianne Hawker said newly qualified lawyers call each other "learned friends, but some of them can neither read, count nor reason". If that is indeed so, it prompts asking how they achieved a degree in the first place.
The situation is sufficiently serious to have resulted in plans to hold a summit in May to discuss the four-year LLB degree, as per agreement by the law deans of the various universities, the Law Society and the General Council of the Bar. At issue is exactly this — does the four-year degree deliver what was promised?
The answer seems pretty obvious. The overwhelming response is no, it doesn’t. So what is to replace it? The answer seems to be a reversion to the previous five-or six-year degree courses, in which the initial, undergraduate degree is generalised and leads to a straightforward BA or BCom degree.
That leads to the LLB degree itself, another two years of study. It means that, after five years, or in some cases six, those leaving the universities equipped with two degrees and five or six years of study are more mature and significantly better educated.
They can then migrate with comparative comfort into the daily business of legal life, learning how a law firm works, what the pressures are, and how excellent research can genuinely influence the outcome of various cases.