Mergers and Acquisitions in Zimbabwe

Mergers and acquisitions (M&A) are important corporate growth strategies regularly used by corporations internationally in terms of which the merging parties, combine their economic resources, skills and knowledge with the aim of expanding operations and increasing access to goods and services for the benefit of the consumer.

There have been significant M&A transactions in Zimbabwe in the last decade, with many more corporate mergers expected. 1 In the last decade most M&A transactions in Zimbabwe have involved transactions in the financial sector (banking), insurance, beverage distribution and manufacturing, hospitality, tobacco processing, retail and petroleum to mention a few.

Leading scholars R Whish & D Bailey, Competition Law (7 ed) (Oxford University Press, 2012) 810 state that:

‘Competition law is concerned about the possibility that a merger will lead to the market being less competitive in the future than it currently is, leading to adverse effects for consumers. The main concern of competition authorities when assessing a merger is whether it will have adverse horizontal effects; there may also be concerns about vertical and conglomerate effects, but these concerns are much rarer. It is possible that the same case can give rise to horizontal, vertical and conglomerate concerns.’

In terms of Clause 8.12 of the Common Market for Eastern and Southern Africa (COMESA) Merger Assessment Guidelines (2014) mergers are broadly classified as horizontal and non-horizontal (e.g. vertical, diagonal and conglomerate mergers). In Zimbabwe there are three types of mergers recognised by the Competition Act [Chapter 14:28] which include vertical, horizontal and conglomerate.

In Competition and Tariff Commission v Innscor Africa Ltd & Another HH 486-17 the following definitions of mergers were outlined:

Competition law recognises three types of mergers being, vertical, horizontal and conglomerate mergers. Horizontal mergers are mergers that take place between companies that are in direct competition with each other. An example of a horizontal merger is a merger of two businesses with similar products that are in competition to each other. An example of a horizontal merger is that between Daimler and Chrysler, two car manufacturing companies that merged. Vertical mergers are those mergers that take place between two related companies as in the case of a customer and a company or where a supplier and a company merge. An example of a vertical merger is one between a tyre manufacturing company and a retailer selling or marketing the tyres. A conglomerate merger is a term that is used to denote a merger between large firms that engage in unrelated business activities with different customer bases. Such entities are not competitors and do not have a customer and supplier relationship. There is no economic relationship between the acquired company and the acquiring company. A conglomerate merger is able to diversify its activities and manage a wide range of activities through the merger. The merger may result in an increase of its market share and power. A conglomerate merger may create a monopoly resulting in it pushing other companies out of the market and may impair competition on the market. The Act specifically refers to acquisitions of a controlling interest in the business of a competitor, customer or supplier only and hence directly speaks to vertical and horizontal mergers only. There is no specific reference made in the Act to conglomerate mergers.

The Supreme Court on appeal explained the three types of mergers existing in Zimbabwe in Innscor Africa Ltd & Another v Competition and Tariff Commission SC 52-18 as follows:

There are three types of mergers recognised under competition law - vertical, horizontal and conglomerate. Vertical mergers are those mergers that take place between two related companies as in the case of a customer merging with its supplier. Horizontal mergers are those that take place between companies that are in direct competition with each other. Conglomerate mergers are those between two or more firms that engage in unrelated business activities with different customer bases. Such entities are not competitors and do not have a customer and supplier relationship.