As the Central Bank of Nigeria announces new recapitalisation plans for the banking sector, we look at the past 5 years where over $2.6b of capital has been expended by investors looking to secure ownership stakes in Nigerian banks. For real estate service providers, this is an opportunity to support the important post-transaction real estate portfolio optimisation process and earn fees. As we have noted in the past, many corporate entities often invest heavily, amassing vast real estate portfolios and unintentionally tie down capital in a non-core business area.
When a merger or an acquisition occurs, it presents a great chance to revise portfolio strategy, which can lead to the disposal of branches, HQ relocations, leasing some space back onto the market or even attempting an aggressive growth strategy. All of which are fee earning opportunities for real estate service providers.
The graphic below shows the 9 bank M&A transactions since 2014.
Before we continue, here’s what we noticed:
- 54% of the amount of capital invested in acquiring significant stakes in Nigerian banks were done by International investors while 46% were carried out by Domestic investors.
- There was no activity in 2015 and 2016 and this can be traced to the recession and the progressive devaluation of the Naira, which kept most foreign and domestic investors with USD out of sight.
- Surprisingly, the highest acquisition fee was $727M by Skye bank to acquire 100% Mainstreet Bank which translates to approximately 4 Ikeja City Malls at 2015 dollar exchange rate.
- For the second time, Access Bank is showing its good eye, not just for acquiring banks, but also their impressive Headquarters. With the acquisition of Intercontinental Bank in 2011, Access Bank took over their newly Charvet built HQ on Danmole Street in VI. This year, after their merger with Diamond Bank, the same happened to a brand new Cappa & D’alberto built HQ in Oniru.
Real Estate Service providers such as Broll, Trillium, FRISIA Real Estate Partners offer a Portfolio Management service. This typically involves offering end-to-end corporate real estate solutions for businesses across all sectors, including advisory and transactions, workplace consulting, project management, estate management and more. CBRE’s global contract with Standard Chartered Bank means that Broll is in charge of the investment and asset management of SCB’s African assets. Their workplace consulting solution has the SCB team continually optimizing space usage within its HQ and leasing free space back onto the market for additional income.
Looking at bank branches in particular, regulatory-driven M&A can also lead to attractive fee earning opportunities and this was the case during in 2011. An industry-wide audit by CBN leading to the Mergers & Acquisition of 2011 after a recapitalisation deadline of September 30th, 2011. What followed was a huge 6.11% decrease in the number of bank branches from 5,809 to 5,454 in 2011. Afterwards, it regressed by an average -1.07% from 2011 to 2018.
With this, it is important that real estate practitioners stay on the qui vive under the right set of circumstances, to take advantage of M&A opportunities any sector may present.