Kenya tops in the EA deals pipeline

Kenya has this year dominated the deals landscape in East Africa, accounting for 71 percent of all deals and cementing Nairobi’s status as the regional business hub.

Analysis of the region’s deals by investment advisory firm I & M Burbidge Capital for the 11 months to November shows Kenya accounted for 74 of the 104 deals. The other countries included in the survey are Tanzania, Rwanda, Uganda and Ethiopia.

The total disclosed value of the deals — although a sizeable number of dealmakers do not disclose the financial value — stood at Sh163.1 billion ($1.62 billion), compared to Sh148 billion ($1.47 billion) in 2018, when there were 67 deals concluded by the end of November.

“Interestingly, 62 percent of all disclosed deals in the year-to-date are private equity transactions (64 deals), although, by value, mergers and acquisitions (M&A) transactions edge private equity transactions by about 45 per cent,” said I & M Burbidge Capital chief executive Edward Burbidge.

“The highest volume of deals year-to-date has been recorded in the financial services (22 percent), agribusiness (13 percent) and the energy, oil and gas sectors (11 percent).”

The biggest deal of the year was done in January, where Indonesian oil giant Medco Energi struck a Sh51.7 billion deal to buy a 100 percent stake in Londo- listed Ophir Energy, which held a long-standing interest in Kenya until 2016 when it announced it was exiting oil exploration investments at the Coast-based Block L9.

In total, mergers and acquisitions, whose value was disclosed, were worth Sh69.82 billion ($693.4 million), while private equity (PE) deals were valued at Sh48.2 billion ($478.8 million).

Of concern though is the continued dearth of deals in the capital markets, which include initial public offerings, bonds and commercial papers, especially in the Nairobi Securities Exchange (NSE), which is the region’s largest bourse.

In the 11 months, the region saw bond issues valued at just Sh4.9 billion ($48.4 million), and commercial papers worth Sh503.5 million ($5 million).

PE firms making exits have more often opted to sell to fellow venture capitalists rather than use the region’s stock markets as an exit avenue.

Last week, outgoing Capital Markets Authority Chief Executive Paul Muthaura lamented the fact that the NSE has missed out on the tide of a vibrant private transactions environment over the last decade, with many PE funds currently at the exit stage of their investments.

Corporate bond issuances have also been affected by investor fears over the safety of funds following the high profile collapse of two banks in Kenya in 2015 and 2016 that went down with billions on bondholder funds.