Regional Integration and Cross-Border Mergers and Acquisitions in Africa

Abstract

This study uses a structural gravity model to examine how regional integration affected cross-border mergers and acquisitions (M&As) in Africa during the period from 2000 to 2014. We found that customs unions in Africa, specifically the Southern Africa Customs Union (SACU) and the East African Community (EAC) were significant drivers of M&As by firms within the unions but not for those outside the unions, perhaps the result of the relatively small size of these economic blocs. The Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC) do not appear to encourage either intra- or extra- regional M&A flows. These findings suggest that the depth of regional integration determines intra-regional M&A flows in Africa. Therefore, African governments should strengthen existing economic integration agreements to benefit more from cross-border M&A flows from within the regional blocs and to attract foreign investment from non-member countries.