Capital Markets

EA deals fall to Sh77bn as corona saps investor cash

deals

Guests during a private equity and venture capital conference in Nairobi in April 2019. PHOTO | DIANA NGILA | NMG

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Summary

  • Data compiled by advisory firm I&M Burbidge Capital shows that the deals fell to $716 million (Sh77.3 billion) in the six months to June, compared to $1.1 billion (Sh118.8 billion) in the first half of last year.
  • Deals tracked by the firm rose to 56 this year, from 52 in the first six months of 2019. However not all these had their values disclosed, with some dealmakers preferring to keep the monetary value of their transactions private.

The disclosed value of deals in East Africa fell by a third in the first half of the year compared to the similar period last year, as Covid-19 pandemic economic challenges affected liquidity available.

This was despite the number of deals going up

Data compiled by advisory firm I&M Burbidge Capital shows that the deals fell to $716 million (Sh77.3 billion) in the six months to June, compared to $1.1 billion (Sh118.8 billion) in the first half of last year.

Deals tracked by the firm rose to 56 this year, from 52 in the first six months of 2019. However not all these had their values disclosed, with some dealmakers preferring to keep the monetary value of their transactions private.

“Whilst trade buyer activity has largely kept up with the same period last year, the disclosed deal values have continued their year-on-year decline,”said I&M Burbidge.

“This is mainly attributed to the economic challenges, particularly liquidity, experienced in the last three years and the trend is expected to continue particularly for local player led transactions on account of the corona virus pandemic.”

Kenya continued to dominate as the epicentre of deals in the region, largely owing to Nairobi’s position as the region’s financial and logistics centre.

Nairobi accounted for 38 of the 56 deals reported in the six months to June, equivalent to 68 percent of the region’s total.

Ethiopia and Rwanda followed with six deals each, while Tanzania and Uganda recorded four and two deals respectively.

Kenya’s share of the region’s deals was however lower than in the similar period last year, when the country’s 38 deals accounted for 73 percent of the 52 deals recorded in the region.

Private equity deals continued to dominate, accounting for 37 of the 56 transactions concluded this year, followed by mergers and acquisitions at 17 deals.

Joint ventures and partnerships recorded two deals apiece, while bonds and capital restructuring had one deal each in the period.

I&M Burbidge said in their report that the robust PE activity was due to many firms recently closing new and follow-on funds and are thus on the lookout for new investments, as well as their having a positive outlook on the long term growth prospects of the region.