Kenya ranked among Africa’s most active in deal making

What you need to know:

Up to 36 per cent of 100 investors in Africa that were polled by UK-based research firm Mergermarket said they see Kenya being the most active cross-border acquirer over the next 12 months
This places the country ahead of Tanzania that was ranked fifth (21 per cent), and Angola (12 per cent)
South Africa is expected to lead in outward acquisitions at 89 per cent, followed by Nigeria (66 per cent), and Ghana (53 per cent)

Deal makers see Kenya as the fourth most active country in Africa in closing cross-border acquisitions over the next year.

That view is informed by the trend where more local companies are taking over established businesses in the region as part of their growth strategies.

Up to 36 per cent of 100 investors in Africa that were polled by UK-based research firm Mergermarket said they see Kenya being the most active cross-border acquirer over the next 12 months.

This places the country ahead of Tanzania that was ranked fifth (21 per cent), and Angola (12 per cent).

South Africa is expected to lead in outward acquisitions at 89 per cent, followed by Nigeria (66 per cent), and Ghana (53 per cent).

Cash-rich Kenyan firms have acquired several medium-sized firms in neighbouring countries in search of growth.

They include TPS East Africa, I&M Holdings, Nation Media Group, Scangroup, TransCentury and Unga Group which recently acquired a 40 per cent stake in Unga Millers (Uganda) Ltd.

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An investment officer at a Kenyan private equity firm who participated in the survey said both indigenous and foreign firms in Nairobi are making acquisitions in the region.

“Both local and international firms are targeting the region mainly to generate profits and increase their shareholder value,” the PE executive said.

An acquisition has the advantage of eliminating the regulatory burdens associated with a new operation, including a licence.

It also saves the acquiring firm the high cost of customer acquisition—including marketing expenses—that a start-up must invest in to gain market share.

The acquisitions being executed by Nairobi-based firms have been driven by the East African Community Common Market that has provided a consumer market of over 120 million people amid reduced barriers to trade.

Local firms venturing into the EAC have, however, been dwarfed by the bigger investments made by their homegrown peers such as KCB that have started operations from scratch in the neighbouring economies.\

KCB was ranked as Kenya’s largest foreign investor over the past five years by a new report from United Nations Conference on Trade and Development (UNCTAD).

KCB has invested Sh26 billion ($300 million) abroad in the past five years, according to the report, which did not, however, list the other top investors.