Capital Markets

EA deals fall in August as Covid limits capital flow

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In one of the deals, Coop Bank acquired Jamii Bora whose name changed to Kingdom Bank. FILE PHOTO | NMG

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Summary

  • An analysis of the deals landscape by advisory firm I&M Burbidge Capital showed that there were only four deals recorded in August, with a disclosed value of Sh2.26 billion (from two of the four deals), compared to 12 with a disclosed value of Sh14.8 billion in July.
  • Of the four deals, three were private equity investments while there was one merger and acquisition deal in the financial sector where Kenya’s Cooperative Bank completed the buyout of a 90 percent stake in tier three lender Jamii Bora Bank.

Corporate deal activity in East Africa fell to its lowest monthly volume this year in August, weighed down by the negative effect of the Covid-19 pandemic on private capital movement and the seasonal dip due to European summer holidays.

An analysis of the deals landscape by advisory firm I&M Burbidge Capital showed that there were only four deals recorded in August, with a disclosed value of Sh2.26 billion (from two of the four deals), compared to 12 with a disclosed value of Sh14.8 billion in July.

Of the four deals, three were private equity investments while there was one merger and acquisition deal in the financial sector where Kenya’s Cooperative Bank #ticker:COOP completed the buyout of a 90 percent stake in tier three lender Jamii Bora Bank.

“Corporate deal making in East Africa slowed down in August in what could the heralding of a period of muted activity as the effects of the coronavirus pandemic on private capital markets/capital movements become more apparent,” said I&M Burbidge in the report.

“Whilst performance in August may be indicative of these effects (of the pandemic), it is important to note that deal making in the region slows down around August and September, as most of Europe, where a large portion of financing is sourced, goes on Summer holidays.”

The firm added that the movement of capital will likely remain muted towards the end of the year, as a result of the longer transaction timelines on deals, which are now averaging six to 15 months.

In terms of deals volume in the eight months to August, the region saw 75 transactions, compared to 69 in the corresponding period in 2019.

The disclosed value of the deals in 2020 stood at Sh94.1 billion ($868.9 million), compared to Sh142 billion ($1.31 billion) in the similar period in 2019.

NAIROBI LEADS

However, not all of them had their values disclosed, with some dealmakers — especially in private equity — preferring to keep the monetary value private.

Kenya continued to dominate the volume of deals in the region, accounting for 52 in the eight months to August this year, and 57 last year.

The country rides on Nairobi’s status as the regional financial and logistics hub, which makes the city attractive to those setting up regional offices.