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CAK sees more suitors for digital companies

Glovo
Glovo, an online delivery firm, has partnered with retailers to take goods to customers’ homes. FILE PHOTO | NMG 

The Competition Authority of Kenya (CAK) expects digital firms to witness increased interest from firms seeking mergers and acquisitions post Covid-19.

Mergers and acquisitions manager Raphael Mburu said in a Thursday webinar that the watchdog expects companies to seek new synergies as Covid-19 changes the business environment.

CAK has so far handled about 123 applications for mergers and acquisition in the year to date in contrast to 141 for full year to June 2019. The Authority expects Covid-19 to change the types of deals that will be seen going forward, with digital firms becoming more attractive.

“Generally we do not expect a decrease in number of deals. We expect companies to pursue new lines of business such as online deliveries,” said Mr Mburu.

“We are likely to see hospitality companies partnering with online delivery firms to achieve synergies for business.”

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Online delivery firms such as Sendy and Glovo have partnered with supermarkets for home delivery of goods since the onset of Covid-19, showing the increased profile of firms playing in e-commerce space. Some of the deals may be killer mergers where large firms acquire upcoming e-commerce firms to pre-empt future competition as buying habits shift online.

Heightened mergers and acquisitions in sectors such as banking, retail, telecoms and oil have called CAK into action to make determination on crucial areas such as dominance, buyer power and protection of jobs.

The director for competition and consumer protection Boniface Makongo said whereas there have been no merger applications getting rejected in the last 12 months, the authority has improved in terms of pre-approval conditions. The most common condition has been on jobs, with many merging entities being ordered to keep most or all of the employees for a specific period of time.

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