After half a decade of grovelling for the odd corporate finance morsel, the band of bankers, lawyers and accountants who ply their trade in listing, delisting, restructuring and buying companies is smiling again.
SA's suit-clad deal brokers have had to survive the past five years on a diet principally of delistings and black economic empowerment (BEE) transactions (neither big fee makers). But last year, SA notched up R261bn-worth of domestic transactions, the third-best year on record after 1998 and 2000 (see graph). It is a global phenomenon, one SA seems to lag slightly - the rest of the world had its best year ever last year.
WHAT IT MEANS
 Deal-making activity is in full swing
Private equity is a major new theme
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"Last year was crazy. We've never seen anything like that," says Ezra Davids, partner at Bowman Gilfillan. "It was different types of work - in the past few years it's been BEE deals. Now it's not just those - private equity is a big thing. The other trend we've detected is huge interest by international companies looking at large JSE-listed companies - they're still bubbling below the surface."
This is thanks to record equity markets and a renewed appetite by companies to find fresh capital, escape the clutches of stingy shareholders or get their hands on growth-inducing acquisitions. It all feeds a positive deal-making psychology. Investment bankers (most often the initiators of transactions) have renewed their search for good assets and good buyers, with calculators and financial statements in hand. Inspired by the riches being accumulated around them, companies and investors are also on the lookout. The alchemy delivers gold when the three come together - seller, buyer, and the army of advisers.
In this special report, we assess that army and their successes last year. Theirs is a highly competitive industry - scoring an advisory role on major transactions is a coup. There are two principal actors on the stage: investment advisers, which are largely investment banks (see ranking of investment advisers); and legal advisers, usually law firms (see ranking of legal advisors). Accounting firms often play a role in either of those camps.
Another type which is becoming more frequent on the landscape is boutique finance houses, usually with specific niches combining both legal and financial skills.
All transactions in SA have a third role player, sponsors, which must shepherd any transaction involving a listed company. This role is most often played by stockbrokers, but banks, boutiques and accounting firms do so too (see ranking of sponsors).
In this special report we publish league tables researched by Ernst & Young based on the tombstone values put on deals. Such public deals, though, are often the tip of the iceberg. Many other deals happen off-market, while big additional fees are earned advising on deals that fail to make it to completion. Those seldom get any publicity.
The swarm of advisers depends entirely on the union of willing buyer and willing seller. Even the staple of the past, delistings, requires a buyer, as do BEE deals and new listings. Each side of the largest transactions, usually complex cross-border deals, can have 100 professionals advising.
Apart from the bankers, lawyers and sponsors, management consultants figure out business plans and integration processes; public relations firms figure out how to spin it to the investment community and the public; still others advise on political and economic risks for the jurisdictions of the deal.
But just what is it that gets the chemistry happening? Recent M&A activity in SA has been dominated by the need to introduce black shareholders to companies. It was a major theme of last year, as it has been for the past decade.
But there was a new cook at the feast: private equity. Domestic private equity operators raised new funds from third-party investors to build significant transaction war chests. At the same time, foreign private equity players, including worldwide names, took a distinct interest in SA companies. Already in 2007 the offer of R25bn for Edcon by Bain Capital set new SA private equity records.
It is a trend that firmly took off last year, and will dominate activity during 2007, with future bids for medium and large SA companies likely. With so much private equity firepower searching out targets in SA, expect deals to be the site of much competition, helping push prices upwards. Last year, the two domestic private equity majors, Brait and Ethos, clashed in the deal for Consol Glass - the first time the two firms have come head to head over an asset. (At the time of going to press, Brait had it wrapped up). With only a finite number of companies appropriate for private equity deal-making, and a vast amount of capital available, such clashes are likely to become the norm.
While private equity will be a major theme of 2007, so will be BEE. This year, it will be given momentum by an amendment to the Companies Act that will simplify transactions.
There is also sure to be much activity around the refinancing of existing transactions: the bull market means many BEE investors have built up substantial net asset value, giving them the opportunity to restructure their financing arrangements to bring down the cost of funds.
Commentators also expect more "intra-BEE" deals to take place, as empowerment investors swap assets between them to focus on particular industries. That will be substantially aided if the vending companies agree to waive lock-up clauses to allow the transactions to go ahead.
Those two themes will dominate, but others are likely. Cross-border transactions, in the form of SA firms seeking out foreign targets, were significant in 2006, particularly with MTN's R33,5bn acquisition of Dubai-based telecom company Investcom, which was the biggest transaction of 2006.
The reverse, though, is perhaps more likely now. Foreign-based private equity investors have taken a shine to SA simply because it offers relatively higher returns than assets in developed markets.
But that calculus applies to other growth-seekers - dominant developed market companies. They too need to find ways of expanding, buoyed by cheap capital from home, and acquisition targets in countries like SA are one way to do it. Investment advisers tell the FM they've been mandated by foreign buyers to seek out suitable SA targets. It's a matter of time before one hits the headlines.
These influences mean 2007 is likely to be another record year. Edcon has got the year off to a roaring start; more such deals are expected soon - many listed companies are under cautionary.
The retail sector has been a particular site of activity with Shoprite and Edcon the focus of acquirers.
The global resources boom has meant activity in that area, too. Last year's second-largest transaction was Gold Field's acquisition of South Deep. Mining majors have significant cash at hand, illustrated by BHP Billiton's recent announcement of a US$10bn stock buy-back programme - sure to be emulated by others. That rude health will spur acquisitive activity, too.
There are risks, of course, illustrated by February's market hiccup. Much of the positive sentiment depends on resource-hungry China continuing its growth frenzy. But it is time for the investment advisers to revel in their rediscovered glory.
