Kenya leads East Africa in value of 2016 merger deals
I&M Burbidge Capital data on market deals done in East Africa shows that Nairobi accounted for 72 out of the 107 completed transactions. PHOTO | FILE
What you need to know:
Although activity in 2016 was only slightly lower than the 119 deals recorded the year before, the total value of disclosed transactions fell significantly, having stood at Sh396 billion ($3.8 billion) in 2015.
The market driver for Kenya in 2016 was mergers and acquisitions, private equity investments and joint ventures.
This year has started off with the same trend of Kenyan dominance on the deals that have been disclosed in the region.
Kenya led the East Africa region in the number and disclosed value of deals in 2016, accounting for two thirds of the deals concluded in the period.
Data compiled by I&M Burbidge Capital on market deals done in East Africa shows that Nairobi accounted for 72 out of the 107 completed transactions, and for Sh98.4 billion ($946.4 million) out of the Sh218 billion ($2.1 billion) disclosed value of deals.
The data covers mergers and acquisitions, private equity investments, joint ventures, private placements, IPOs, rights issues and corporate bond issues.
Although activity in 2016 was only slightly lower than the 119 deals recorded the year before, the total value of disclosed transactions fell significantly, having stood at Sh396 billion ($3.8 billion) in 2015.
“Due to the muted activity in the natural resources sector, in particular the year saw a considerably lower value of deals announced than in 2015.
“Interestingly though, the total number of deals done only fell by about 10 per cent despite the larger drop in deal value, meaning that average deal size decreased a little to about Sh3.9 billion ($38 million,” said I&M Burbidge CEO Edward Burbidge.
“We also note that the average deal size is once again heavily skewed by outlying blockbuster transactions, and if we instead apply a median to all deals done in East Africa in 2016 we get a more reasonable Sh956 million ($9.2 million. We expect this to increase substantially over the medium term.”
The market driver for Kenya in 2016 was mergers and acquisitions, private equity investments and joint ventures.
Key deals in Kenya during the year included the Sh14.6 billion equity investment by British development finance institution CDC in ARM Cement in May and the Sh26.5 billion KenGen rights issue in June.
In October, oil marketer Hashi Energy also signed a JV with Dubai-based conglomerate S.S Lootah International worth Sh14.2 billion, to supply the UN mission in Congo DRC with petroleum products, trucks for logistics, food and finance facilities.
This year has started off with the same trend of Kenyan dominance on the deals that have been disclosed in the region.
Data compiled by research firm Stratlink Africa for January shows that Kenya has accounted for a third of the disclosed value of deals, at Sh3.6 billion ($35 million) — being the value of the International Finance Corporation (IFC) acquisition of a 10.37 per cent stake in insurance group Britam.
Stratlink shows that in Tanzania, the value of disclosed investment this year stands at Sh780 million ($7.5 million), coming in form of investment by Developing World Markets in Off Grid Electric Ltd. In Uganda, the incoming investment so far in 2017 stands at a thin $10,000 (Sh1 million).
I&M Burbidge, however, expects activity to pick up in coming months, in spite of elections risk in Kenya and an uncertain global economic climate due to the policies of US President Donald Trump.
“In 2017 we expect another solid year of deal flow, with the highest volumes likely to come, once again, from private equity, mergers and acquisitions,” said Mr Burbidge.
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