 deals in Nigeria's Pensions Industry since 2013 as analysts expect){kind=link}
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There had been a total of sixteen mergers and acquisition (M&A) deals in Nigeria’s Pensions Industry since 2013 as analysts expect more business combinations, which underscores investors’ confidence in an industry that is poised for stronger and sustainable growth.
It appears there are more of such deals in Nigeria’s Pensions Industry than in the banking, insurance, and microfinance sectors, and more interesting is that there were transactions going on even amid the coronavirus pandemic that disrupted economic activities across.
Of course, the regulatory induced recapitalisation exercise is a major catalyst for the transformation of the industry as Pension Fund Administrators (PFAs) are growing Asset under Management and delivering higher returns to shareholders.
“We expect more M&A deals in the industry to be announced in the coming months,” said analysts at Chapel Hill Denham.
“In our view, investment in and utilisation of advanced technology and digitisation to deliver excellent service to customers will be central to winning in the pension industry over the long term,” said the analysts.
Banks who crave for viable investment opportunities to widen their earnings base are acquiring PFAs, and they have the financial and staff strength to embark on such transactions.
In 2022, GTCO acquired 100% shares in Investment One Pension Managers Limited at 0.15x AUM while Access Holdings acquired a majority equity stake in First Guarantee Pension Limited.
Furthermore, MBO Capital Management Limited acquired an 80% equity stake in Radix Pensions in 2022. Norrenberger acquired 81% stake in IEI Anchor Pensions while APT Pensions merged with Tangerine Pensions in 2022.
FCMB Group Plc, in 2021, through FCMB Pensions Limited, acquired a 60% stake in AIICO Pensions Limited at 0.07x AUM.
In 2020, AXA Mansard Pension Limited became a wholly owned subsidiary of Tangerine. In 2017, FCMB Pension Limited acquired 60 percent of Legacy Pension Limited. In 2016, Stanbic IBTC Bank acquired 17.65 percent of Stanbic IBTC Pension Limited.
“There will be mergers and acquisitions over the next one or two years in Nigeria’s Pensions Industry, but they will not be induced by regulation, but by competition. PFAs will decide that rather than being alone, let us come together with one or two other PFAs so that we will be stronger and bigger,” said Dave Uduanu, Chairman, Pension Fund Operators Association of Nigeria.
“We are going to see better services from the PFAs; we will also witness recruitment of quality workers, good offices and expansion to other parts of the country,” Uduanu said of the anticipated mega PFAs.
The Nigerian Pension Industry has been on a growth trajectory since the model was changed over a decade ago, thanks to rapidly growing population, compounding population, regulations, and the successful implementation of the Pension Reform Act (PRA) of 2014.
The industry AUM (RSA AUMs + Other non-RSA funds) has grown at a 22% CAGR between 2007 and 2021 (a 15-year period) to N13.42tn in 2021 (US$30.86bn, CAGR of 11%) on the back of rising number of RSA holders, new inflow of funds (contributions less withdrawals) into the funds and net investment gains.
Industry AUM has grown by 7.0% YTD to stand at N14.36tn (US$33.47bn, +2.4% YTD) as at 31 July 2022.
Analysts at the investment house in the report said that the 2022 recapitalisation resulted in some mergers and acquisitions that reduced the number of PFAs to 20 from 22.
“Over the next 10 years, we reckon that the number of PFAs will shrink to around 10 solid players,” they said.
“We will not be surprised if the number of PFAs reduces to 5 very solid players in the long term, as rising AUM necessitates further recapitalisation with more investors and financial sponsors showing interest in the industry,” said analysts at Chapel Hill Denham.