By Ginen Moodley
Broad-Based Black Economic Empowerment (B-BBEE) is no longer a side issue in mergers and acquisitions (M&A) – however, the answer to whether it is a true deal-breaker depends on how you look at it.
Legally, the framework does not yet give regulators the authority to block a deal outright on B-BBEE grounds. Commercially, however, a weak empowerment profile can derail a transaction just as effectively – through delays, onerous conditions, reputational damage or lost investor confidence.
The Competition Commission has confirmed that B-BBEE will now form part of the public interest assessment in merger approvals. This shifts due diligence beyond financial and operational metrics to include a target company’s empowerment status, ownership structure, and scorecard history. A poor B-BBEE profile may not be enough to stop a deal legally, but it can slow it to a crawl, invite tough conditions or spark public backlash that erodes deal value.
In July, Parliament’s Portfolio Committee on Trade, Industry and Competition has called for greater transparency, fairness, and accountability in M&A deals, particularly with regard to imposing public interest conditions in terms of transformation and the inclusion of historically disadvantaged persons (HDPs).
The Trade, Industry and Competition Committee has gone further, urging the Competition Commission to adopt an activist approach by publishing details of historically disadvantaged partners in approved transactions, creating a centralised database to help companies identify empowerment participants, and embedding lock-in periods to ensure ownership structures deliver real value. These signals point to a regulatory and political environment where transformation is no longer negotiable.This is not only a policy debate, it is already playing out in the market. When Heineken’s acquisition of Distell and Namibia Breweries was approved in April 2023, the deal was cleared on condition that the new entity, HEINEKEN Beverages, committed to substantial transformation initiatives. These included an ambitious investment plan of more than €500m over five years, the construction of a new brewery and maltery, a supplier development and localisation fund, and a Tavern Transformation programme to support 1 000 tavern owners.
The heightened pressure in M&A coincides with broader compliance reforms. In April 2025, the Minister of Employment and Labour published final employment equity targets for 18 sectors. Designated employers must submit five-year plans by 31 August 2025 or face fines and exclusion from state contracts. The burden of proof has also shifted: companies must now demonstrate valid reasons for falling short. Compliance is being measured on outcomes, not intentions.
Small businesses are also under the spotlight. Exempted Micro Enterprises must now file B-BBEE affidavits that include industry classification codes and confirmation of permanent black ownership, submitted directly to sector charter councils. This aims to curb fronting and ensure empowerment translates into genuine participation.
Meanwhile, the legal profession has been reshaped by the Legal Sector Code. Firms are required to demonstrate 50% black ownership, spend 3.5% of payroll on black skills development, and procure more from black-owned legal service providers. Similar industry-specific codes are tightening across the economy, reflecting a broader move from broad-brush compliance to precise, enforceable sector obligations.
Ownership remains one of the trickiest areas. The Codes of Good Practice assess not just shareholding but also voting rights, economic interest, and the sustainability of structures. Community trusts, employee share schemes, and equity equivalents are useful mechanisms, but when poorly designed, they risk collapsing under scrutiny. In an M&A environment, these weaknesses can undermine approvals or unravel a deal later.
For dealmakers, this means that B-BBEE due diligence can no longer be superficial. It is not enough to glance at a scorecard; regulators and stakeholders are scrutinising the substance behind the numbers. Ownership structures, employment equity compliance, procurement practices, and even historical scorecard performance can all influence whether a deal is approved smoothly or delayed with conditions.
So, is B-BBEE now a deal-breaker in M&A? From a legal perspective, the Competition Commission cannot yet veto a merger solely on B-BBEE grounds, but commercially the risks are real: a weak empowerment profile can translate into reputational damage, loss of investor confidence, and transaction timelines stretching out indefinitely.
Transformation has become a decisive factor in whether deals succeed or stall. Businesses that understand this distinction and embrace transformation as a strategic necessity rather than a compliance burden will not only secure smoother approvals but also build credibility and resilience in an economy where inclusivity is inseparable from growth.
Ultimately, the question is not whether B-BBEE is a formal deal-breaker under current law, but whether businesses can afford to treat it as anything less. The direction of policy, enforcement and market expectation is unmistakable. Dealmakers who integrate transformation into their transaction planning will navigate approvals with greater certainty, protect deal value and position themselves for long-term relevance in an economy where inclusivity is fast becoming a cornerstone of commercial success.
Ginen Moodley is a corporate and commercial attorney and the founding director of Moodley Attorneys Incorporated (MAinc), a South African law firm specialising in Business Advisory, Commercial Transactions, Dispute Resolution, and Estate Planning.
