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Kenya leads EA in mergers and acquisitions of private companies

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Rising business confidence, consumer demand and improving economic conditions in the region have whetted business executives’ appetite for firms in the technology, mining and financial services sectors.

Rising business confidence, consumer demand and improving economic conditions in the region have whetted business executives’ appetite for firms in the technology, mining and financial services sectors. 

By MWAURA KIMANI and EMMANUEL WERE The EastAfrican

Posted  Saturday, August 4   2012 at  19:28

Craft Silicon, one of Kenya’s largest software firms, has bought back the 30 per cent stake held by Fanisi, the venture capital firm, in the latest mergers and acquisitions (M&A) deal in East Africa.

In the first seven months of 2012, the region recorded a sharp rise in the number of M&A deals compared with the same period last year, data compiled by The EastAfrican shows, reflecting a global trend.

But with the growth in the number and size of M&A deals in Kenya, Uganda, Tanzania and Rwanda, investors and entrepreneurs are increasingly experiencing difficulties settling the transactions as employee resistance and shareholders revolt land firms in expensive legal battles.

A case in point is the planned acquisition of listed oil marketer KenolKobil by Puma Energy, the Swiss trader, which is fighting a suit in the High Court after employees went to court to block the deal.

Over 20 publicly reported deals have been closed since January, mainly in Kenya, Uganda and Tanzania, with Kenya recording the highest number.

Rising business confidence, consumer demand and improving economic conditions in the region have whetted business executives’ appetite for firms in the technology, mining and financial services sectors.

“There is a lot of interest in the EAC region and especially Kenya. With the new oil finds, East Africa is where growth will happen in coming years,” said Wanjiku Mugane, managing director at Standard Chartered Securities.

“We are likely to see more foreign monies coming in, either in acquisitions or direct investments. All the region needs is to get its politics right,” she added.

A survey of global M&A deals in 2012 by Ernst & Young shows activity was up 10 per cent after plummeting to its lowest levels in two years in the first quarter of 2012, with Africa seeing a rise in deals.

The Democratic Republic of Congo and Sierra Leone were the most-targeted for copper and iron ore assets, despite the higher risks associated with these nations. This highlights the strategic importance of mineral supplies.

The KenolKobil deal will see the oil marketer delisting from the Nairobi Securities Exchange.

The Kenyan government has waded into the acquisitions debate, saying it was kept in the dark over the impending takeover of KenolKobil, putting at risk the interest of minority shareholders, workers and creditors.

Meanwhile, Emerging Capital Partners has bought a 90 per cent stake in Java, the Kenyan coffee house.

In the quarter to March 2012, there were 12 M&A deals in all sectors in the EAC, with a total value of $3 billion completed or announced in the first quarter, the highest during the first three months of any year — compared with six deals worth $17 million in the same period a year ago, according to Thomson One Banker, which provides access to financial data on public companies.

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