Merger transactions between companies are seen to continue rising in the Kenyan market on an election year according to experts in mergers and acquisitions projects.
Kenya’s mature corporate market, intense competition from global players following globalization of trade, increased cash flow in the market and demand for expert and experienced human resource personnel by local firms will be the key drivers to activities in the mergers and acquisition market.
“It is expected that the upward trend on the number of mergers and acquisitions in Kenya and in the region shall continue. However, this is also subject to certain enabling factors such as stability especially following the general election that is coming up in August and a friendly regulatory environment,” said Bernard Musyoka, Partner and an expert on Mergers and Acquisitions at MMC Law Africa.
The 2007 post-election violence resulted in a dip on the number of mergers and acquisitions in Kenya. However, after conducting peaceful elections in 2013, the mergers and acquisitions market in Kenya became vibrant once again.
“Since then, there has been sustained beehive of activities in recent years in the mergers and acquisitions scene in Kenya,” said Musyoka.
A report by I&M Burbidge Capital showed Kenya accounted for 72 of the 107 completed transactions in 2016.
The latest PwC report ranks Kenya ahead of South Africa and Nigeria, as a destination most preferred by Chief executives of big African companies in growth plans to highlight the country’s attractiveness.
According to the report, 14 percent of CEO’s interviewed said Kenya was the most important place for their organization compared to 13 percent for South Africa and 11 percent for Nigeria.
Improved infrastructure, large pool of skilled workers and youthful population are the biggest attraction to Kenya.
Over the year 2017, the market will see more equity transactions in financial services, information, and communication technology, renewable energy, and education.
Africa has recorded one of the world’s fastest growing economies and this has played a key role in attracting investors, especially private equity funds, to invest in the region and Kenya.
Rise in consumer spending and natural resource discoveries in African countries, such as Kenya also have largely contributed to increased activities in private equity and maturity of local corporate markets.
Over the last few years, multinationals have been picking Kenya as a launch-pad into Africa, Kenya’s strategic location in the region being a major pull factor.
This has intensified competition from global players who now have access to the Kenyan market following the globalization of trade.
“To stay competitive, such businesses need, among others, a strong capital base, hence, being more susceptible to mergers in search of capital injections,” said Musyoka.
One of the key drivers in the mergers and acquisitions in the recent years is the availability of cheap money circulating in the global economy compounded with the need for decent returns, which arguably exists in Africa (including in Kenya) compared to other regions.
Similarly, most Kenyan businesses have suffered stunted growth due to lack of adequate skills, lack of corporate governance, mismanagement and generally lack of experience in running large businesses creating pressure for partnerships.
“Local business owners have slowly realized the importance of bringing other more experienced partners into the business, hence partnering with stronger brands,” added Musyoka.