Closing the deal: the South African M&A playbook
May 2026 | SPECIAL REPORT: MERGERS & ACQUISITIONS
Financier Worldwide Magazine
May 2026 Issue
South Africa’s tax and regulatory environment play a decisive role in how M&A deals are structured, negotiated and ultimately executed. Success in this space requires more than commercial alignment; it demands a deep understanding of local tax legislation, regulatory approvals and compliance obligations that can significantly influence both the viability and value of a transaction.
Against a backdrop of improving investor sentiment in 2025 and supported by South Africa’s removal from the Financial Action Task Force grey list and its hosting of the G20 Summit, deal activity has shown resilience.
While overall deal value increased (excluding outliers), volume growth remained modest, reflecting a market that is active but increasingly selective and regulated. This divergence between value and volume suggests that capital is being deployed more carefully, with a focus on strategic assets and sectors offering long-term growth.
Key sectors attracting investment included infrastructure, energy, digital infrastructure and telecommunications, as well as media and broadcasting. These sectors share a common feature in that they are either strategically important or consumer-facing, and therefore potentially subject to heightened regulatory scrutiny.
A market defined by policy overlay
South Africa’s M&A landscape is unique in the way public policy objectives are hardwired into the dealmaking process. Unlike many markets where regulation plays a more limited role, South Africa’s framework is distinguished by its scope and intensity.
Three forces in particular shape the playing field for investors: broad-based black economic empowerment (B-BBEE), competition regulation and exchange control – each intersecting with tax structuring and compliance requirements to shape a transaction.
B-BBEE: strategy, not compliance
For international investors familiar with environmental, social and governance (ESG) frameworks or local ownership rules in other emerging markets, South Africa’s B-BBEE regime is both broader in scope and more directly tied to deal execution risk.
Designed to promote inclusive economic participation by historically disadvantaged groups, B-BBEE extends beyond simple equity ownership to encompass management control, skills development, procurement and socioeconomic contributions. As a result, it demands a highly integrated approach, combining legal, tax and commercial structuring with proactive stakeholder engagement to ensure compliance and safeguard transaction value.
“The outlook for M&A in South Africa is best characterised by calibrated opportunity. The deals that will define the next cycle are those that embrace the country’s policy-driven framework and tax compliance into the core of transaction design.”
B-BBEE is often misunderstood as a compliance overlay or a post-deal adjustment. In practice, it is a central component of deal strategy and can directly influence both the feasibility and value of a transaction. B-BBEE considerations affect ownership structures, funding arrangements and partner selection. These elements must be designed with empowerment outcomes in mind from the outset, rather than retrofitted at a later stage. In regulated and consumer-facing sectors especially, merger approvals are frequently contingent on commitments relating to ownership, supplier development and broader socioeconomic impact.
Importantly, market behaviour has evolved. Investors are increasingly treating B-BBEE as a lever for value creation rather than a constraint, by enhancing regulatory certainty, unlocking procurement opportunities and strengthening stakeholder alignment. Private equity trends, for example, show growing emphasis on meaningful participation by historically disadvantaged groups, not only to meet regulatory expectations but also to support long term business sustainability.
Competition regulation: the rise of public interest
South Africa’s competition regime, which is applicable to certain large and complex transactions, applies a dual test, traditional competition analysis and a distinct public interest assessment. While the former considers market concentration and competitive dynamics, the latter evaluates the broader socioeconomic impact of a transaction, including effects on employment, small businesses and historically disadvantaged individuals.
In recent years, the weighting of these two pillars has become more balanced, with public interest considerations playing an increasingly decisive role in complex transactions. This represents a shift from a more conventional competition framework toward one that actively incorporates policy objectives.
For dealmakers, this means transactions may be approved subject to extensive conditions affecting ownership structures, employment levels and local participation. Approval timelines can be extended due to the negotiation of remedies and undertakings, and valuations and integration plans may need to account for potential restructuring requirements.
This approach differs from many Organisation for Economic Co-operation and Development jurisdictions, where public interest considerations are typically more limited or sector specific. In South Africa, the breadth of the public interest test introduces an additional layer of complexity, requiring early engagement with regulators and careful alignment of transaction objectives with policy priorities.
Exchange control and tax: converging frameworks
South Africa’s exchange control regime has long been a defining feature of cross-border transactions, regulating the flow of capital into and out of the country. However, a notable recent development is the increasing integration of tax compliance into this framework.
Regulatory changes introduced in 2025 have effectively positioned tax compliance as a precondition to certain cross-border payments.
Tax compliance processes must be frontloaded into transaction timelines. Conditions precedent and long-stop dates increasingly incorporate regulatory and tax clearance steps. Non-resident investors are required to engage with the South African tax system earlier and more proactively.
South Africa’s exchange control regime remains principles-based in design, but increasingly rules driven in operation, adding a layer of administrative complexity to cross-border transactions.
Structuring in a high scrutiny environment
The South African Revenue Service has become increasingly assertive in scrutinising transactions, applying anti-avoidance rules and challenging arrangements that lack clear commercial substance. As a result, deals that may appear optimal from a purely financial perspective can quickly encounter regulatory friction if they fail to align with broader policy objectives or withstand the heightened level of tax authority oversight.
Anti-avoidance and disclosure. South Africa’s general anti-avoidance rules and reportable arrangements regime continue to shape structuring behaviour. There is sustained focus from authorities on areas perceived to present tax risk. These include base erosion through interest, management fees and royalties, cross-border arrangements lacking sufficient economic substance and intragroup restructurings that are viewed as aggressive or circular.
The practical response from the market has been a shift toward more conservative and transparent structuring. Investors are increasingly seeking advance rulings where transaction timelines permit, adopting more measured approaches to related-party funding and intellectual property structures and enhancing documentation to clearly demonstrate commercial rationale and economic substance, displaying that defensibility and transparency are essential to sustaining deal momentum.
Interest deductibility: a critical constraint
Interest limitation rules are a central consideration in leveraged transactions and can have a significant impact on deal economics. These rules, which primarily target related-party and cross-border funding, restrict the extent to which interest expenses can be deducted for tax purposes.
For investors, this requires a disciplined approach to financing structures, including detailed modelling of interest capacity under various scenarios, careful calibration between debt and equity funding and alignment of funding arrangements with transfer pricing principles and arm’s-length standards.
In some cases, these constraints may necessitate a re-evaluation of traditional leveraged buyout models, particularly where expected returns are sensitive to interest deductibility. Failure to address these issues at an early stage can lead to material erosion of returns, underscoring the importance of integrating tax analysis into financial modelling from the outset.
Exit planning as an entry discipline
Structuring for exit should not be an afterthought but rather a defining feature of deal strategy from the outset. Regulatory and tax constraints mean that post-investment reorganisations can be costly, slow and prone to unintended consequences.
As a result, investors are adopting an ‘exit‑first’ mindset. At acquisition, consideration should be given to the likely exit route (be it a share sale, business sale, listing or partial disposal), how B-BBEE ownership structures may affect timing and flexibility, competition and regulatory approvals that could arise at exit, and the tax impact of different exit options.
By embedding exit considerations into entry structuring, investors build flexibility, reduce the need for disruptive adjustments and protect value across the investment lifecycle.
Outlook: calibrated opportunity
The outlook for M&A in South Africa is best characterised by calibrated opportunity. The deals that will define the next cycle are those that embrace the country’s policy-driven framework and tax compliance into the core of transaction design. As investor confidence gradually strengthens and capital becomes more selective, success will hinge on foresight, discipline and early alignment with regulators.
For those able to navigate this complexity with precision, South Africa continues to offer compelling, resilient opportunities where well-structured transactions can unlock not only financial returns, but durable, long-term value in a market that rewards strategic intent over short-term arbitrage.
Ziyaad Ravat is a partner and Gemma Henry is an associate director at KPMG South Africa. Mr Ravat can be contacted on +27 (82) 717 5133 or by email: ziyaad.ravat@kpmg.co.za. Ms Henry can be contacted on +27 (79) 512 9950 or by email: gemma.henry@kpmg.co.za.
Ziyaad Ravat is an experienced corporate tax and M&A tax partner based in South Africa, with more than 15 years of experience advising large local and international clients including multinationals, corporates, private equity funds and government entities across a range of sectors including financial services, mining, energy, FMCG, telecommunications and technology. He partners closely with clients to unlock value and manage risk through every stage of the deal lifecycle, from due diligence, modelling and structuring to post-deal integration and tax compliance. Mr Ravat is also the lead for private enterprise tax in South Africa, focusing on private high-growth enterprises and family-owned businesses.
Gemma Henry is an associate director in KPMG South Africa’s tax and legal practice with over 10 years’ experience, specialising in corporate tax. She has a particular focus on tax due diligence (buy-side and vendor), tax structuring and refinancing, M&A support, tax modelling, and corporate tax advisory and compliance. Ms Henry has advised multinational and private equity clients on complex cross-border investments, and has worked extensively across the renewable energy, oil and gas, industrial, pharmaceutical, automotive and private equity sectors.
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