Kenyan and South African companies were the key originators of mergers and acquisitions deals in the region, new data shows, as the value and size of transactions hit new highs for the first eight months of 2013.

An analysis by The EastAfrican based on publicly announced deals since the beginning of the year shows that Kenyan and South African firms were involved in at least half of the deals done in the region, underscoring the importance of the two countries as key sources of investments.

Dealmakers expect activity in the M&A field to heighten in the last quarter of 2013 that starts next month, riding on business confidence, consumer demand and improving economic conditions in the region.

Firms in the technology, mining and financial services sectors are tipped to be the biggest drivers of M&As.

In the first eight months, IT, pharmaceutical and mining companies attracted the highest capital inflows as investors trooped into the three sectors. Kenya recorded the highest number of deals as well as the highest value of transactions, followed by Tanzania, Uganda and Rwanda respectively.

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On Monday, Duba-based Al-Futtaim Group announced that it intends to make a bid for CMC Holdings, the Nairobi Securities Exchange-listed car dealer, valuing the company at $86.67 million. Of the 30 deals made public across the region, Kenya had 12. The increasing M&A activity is providing a lucrative income stream for transaction advisors like investment bankers and lawyers who are raking in millions of dollars in fees.

Out of the 12 mergers and acquisitions in Kenya that were tracked by The Eastafrican, South African companies were a party in over half.

Dimension Data has offered to buy NSE-listed Access Kenya for Ksh3.05 billion ($36.4 million). Financial services group Alexander Forbes sold its Kenya health insurance brokerage arm Alexander Forbes Healthcare Kenya to JSE-listed Afrocentric Investment Corporation trading for an undisclosed fee.

The JSE-listed financial company Sanlam increased its stake in Pan African Insurance. South African wine maker Distell is expected to conclude the purchase of a stake in Kenya Wine Agencies Ltd (Kwal).

The Kenyan unit of JSE-listed financial firm Old Mutual acquired a controlling stake in Kenyan microfinance lender Faulu Bank.

In Tanzania, Kenya-based Pan Africa Power Solutions through its Tanzania subsidiary acquired Independent Power Tanzania Ltd (IPTL) at an undisclosed fee. UAP Group acquired a 60 per cent stake in Tanzania’s Century Insurance Company.

Tanzania’s Fair Competition Commission (FCC) has also approved the acquisitions of Tanzania Hair Industries Ltd by Hair Industry and Weave IP Holdings Mauritius Pvt Ltd. Citron Communications Management Co. Llc and Rural Net Co Ltd as well as Datatec Ltd and Comztek Holdings have notified the authority of their impending mergers and are awaiting the agency’s approval.

The number and size of deals in Tanzania is likely to be higher in coming months since, unlike Kenya where most deals have been made public due to one party being a listed company, some of the deals could have involved private companies.

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Again, the FCC has not made public the number of deals that it has approved since March this year.

In Uganda, Kenyan companies were represented in half of the four deals tracked by this paper. The Kenyan private equity firm Fusion Capital acquired a stake in Mukono Printing and Publishing Company, one of Uganda’s oldest publishing houses. Gelp Service Stations Ltd, owned by Ugandan businessman Godfrey Kirumira, acquired the Uganda operations of Kenyan retailer Tuskys.

In Rwanda, Kenyan companies acquired a stake in two Rwandan firms. The Kenya-based investment fund Fanisi Capital invested $3 million in pharmaceutical wholesaler Sophar Ltd as well as another $3 million in ProDevelopment. The investment was through debt and equity. Private equity firm Fusion Capital paid $2 million for a 46.5 per cent stake in Rusororo Aggregate Ltd, a Rwandese quarry, at roughly $4.3 million.

Mauritius firm Liquid Telecom bought the assets of the defunct Rwandatel after it was declared bankrupt in 2011, as part of plans to extend its fibre-optic network across Africa.

According to Robert Mathu, the executive director of the Rwanda Capital Markets Authority, the relatively few deals in the country are due to inactive market intermediaries.

Companies dealing in fast moving consumer goods feature prominently on the list, driven by a desire among investors to position themselves in sectors that allow them to benefit from the growing spending power of the region’s middle class.

“Consumer-based sectors are big time. They are recording much more business activity. There is a lot of consumption, people have more disposable income and they are spending money,” said Ayisi Makatiani , the managing partner and CEO of Fanisi Capital Ltd.

There is also a marked interest in companies in the IT sector, a factor that experts say is due to the low broadband usage in the region. Liquid Telecom purchased Rwandatel, while Data Dimension has offered to purchase Access Kenya in a deal that has received shareholder approval. In January, Liquid Telcom announced it had purchased 61 per cent of Kenya Data Network (KDN) from the Altech Group.

Broadband usage in the region is still low partly due to the fact that 90 per cent of Internet access is through mobile phones.

However, in the three months to March this year, the total international bandwidth used by Kenya jumped 72 per cent —from 535,000Mbps to 921,000Mbps — reflecting the growing data usage in the country. Companies in the pharmaceutical industry are also attracting special attention among dealmakers.

Fanisi invested in the pharmacy retail chain Halton, while in Uganda Saudi Arabia-based PE firm Abraaj Group bought a stake in Vine Pharmaceuticals Ltd, a fast growing Ugandan drug retailer.

With Africa seen as the last growth frontier, analysts expect the average size of future deals to rise in tandem with economic growth.

The growth will help Africa claim a bigger share of the M&A market.

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The African Development Bank (AfDB) estimates that the continent accounts for only 3 per cent of global M&A deals.

“Energy, mining and utilities sectors are expected to remain the main catalysts of takeovers in the continent. In addition, Africa’s market is expected to benefit from the growing interest among companies from emerging partners in the continent’s potential,” said AfDB.

Industry observers anticipate more corporate bond transactions in the last quarter of 2013 but are also counting on a stream of deals flowing from the real estate sector as some private equity investors cash in on falling property values.

“I expect more deals to be concluded in the real estate sector before the end of this year due to falling values of several prime properties. Compared with last year, the market has fared less impressively because of widespread uncertainty on key policy matters like foreign borrowing and commercial oil production,” said Abu Mayanja, a financial analyst based in Kampala.

By Peterson Thiong’o, David Mugwe, Benard Busuulwa, Joseph Mwamunyange, Steve Mbogo, Kennedy Senelwa and Alex Ngarambe