Mergers and acquisitions specialist DLA Piper says Kenya’s middle class and a stable political environment are a magnet for foreign direct investments across sectors.
The multinational with offices in 40 countries said in a presentation that investors were eyeing agro-processing, capital investment, construction, energy, financial services, manufacturing, mining, tourism and telecoms across Kenya.
It said Kenya and Ethiopia were the most attractive in Africa and private equity (PE) firms should target family-owned businesses to transform them into professionally run outfits.
“With the right management team, incoming PE expertise could take advantage of market innovations as well as new structures, such as investment holding companies and evergreen funds to overcome cost and time constraints,” it said.
The latest entrant into the Kenyan market is India-based realtor Shapoorji Pallonji that together with PE firm Actis set aside Sh12 billion in a Kenya-specific purpose vehicle for development of multi-storey residential apartments targeting the middle class.
This week, UAE’s family owned AJ Capital and Investment LLC acquired a 51 percent stake in Nairobi’s IFA Insurance at an undisclosed price while US pension firm managers toured Kenya in hunt for partnerships in public-spirited projects.
DLA Piper added PE firms should also invest in training to fast-track growth in firms they invest in, adding hands-on style of ownership that most PE investors display helped to improve business performance.
It said PE firms must shift focus from lowering operational costs to grow profits for the long-term viability of the companies they invest in.
“They need to find new, innovative ways of creating real value for these companies and transforming them into sustainable businesses that will continue to prosper even after the firms funding them have stepped away,” said DLA Piper.
About 1,000 PE deals worth Sh2.5 trillion were concluded in Africa in the past six years where close to 200 deals took place in East Africa.