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E. Africa corporate deals cross Sh102 billion mark




An Engen fuel station in Mombasa. FILE PHOTO | NMG  

The disclosed value of corporate deals in East Africa crossed $1 billion (Sh102 billion) in the nine months to September, largely driven by merger, acquisition and private equity deals in Kenya.

Data compiled by advisory firm I&M Burbidge Capital shows that the number of deals in the period stood at 58, equal to last year’s over the same period. Out of these deals, private equity dominates with 29 followed by mergers and acquisitions at 23.

The financial services and ICT sectors accounted for nearly half of all deals, a combined 47 per cent, while energy (nine per cent), transport and logistics (seven per cent) and manufacturing (seven per cent) also had a good showing.

“Private equity investments and exits compose the majority of deals recorded thus far with 29 deals valued at $491.65 million (Sh50.4 billion). M&A deals follow closely behind with 23 deals but at a higher value of $572.38 million (Sh58.7 billion),” said I&M Burbidge in their East Africa Financial review report for September.

“This is indicative of East Africa’s profile as a key investment destination, particularly for private equity investors backed by foreign capital, a stark divergence with foreign investor participation in the public capital markets.”

In September, the report says, the largest deal was Vivo Energy’s acquisition of Engen’s operations in eight African countries, including Kenya for Sh20 billion. Other significant deals so far this year include mobile lending firm Tala’s Sh6.5 billion capital raise in April for expansion and insurer Allianz Group’s Sh8.1 billion agreement to acquire an eight per cent stake in reinsurer Africa Re in May.

Most investments into the region are thus taking place outside of the capital markets, where companies have reduced their capital raising efforts though corporate bonds or listings significantly the last few years.

The Kenyan stock market—the most vibrant in the region—has not had an IPO since 2015’s Stanlib Fahari I-Reit sale, and there has only been one corporate bond issued (EABL’s Sh6 billion second tranche offering) since 2015.

When exiting an investment, private equity firms are also failing to make use of the stock market as an option, preferring instead to sell their stakes directly to the PE firms or strategic investors.