Kenya among Africa's most attractive mergers markets

A view of Nairobi skyline. PHOTO | FILE 

In Summary

• Energy, mining and utilities are expected to generate most merger and acquisition activity in the region accounting for 79 per cent followed by industrial and chemicals sector.
• The investor appetite for deals in Africa is expected to be further driven by the slowdown in economic growth of China, shifting focus from the Asian economy to top countries within the region seen as resilient to declining commodity prices.

By IMMACULATE KARAMBU
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Kenya is among the most attractive target countries for merger and acquisition activity in Africa according to a new report by a business risk consultancy.

Control Risks also names South Africa and Nigeria as other top countries in the continent where investors want to put their money.

The report was produced after a survey that involved interviews with 100 merger and acquisition practitioners operating in Africa.

Respondents expect 41 per cent of foreign buyers of African companies in 2016 to come from Europe with Asia-Pacific and North America at 39 per cent and 16 per cent respectively.

Energy, mining and utilities are expected to generate most merger and acquisition activity in the region accounting for 79 per cent followed by industrial and chemicals sector.

“Downturns in more established markets make international buyers look out for new targets. Capital is more easily available and high-quality targets are offered at very attractive prices,” said George Nicholls, senior managing director for Southern Africa at Control Risks.

CHINA SLOW DOWN

The investor appetite for deals in Africa is expected to be further driven by the slowdown in economic growth of China, shifting focus from the Asian economy to top countries within the region seen as resilient to declining commodity prices.

This is also supported by the growth projections for the Sub-Saharan Africa region this year which is set at an average of 4 per cent, above the average rates of other regions in the world.

READ: Oil, gas firms embrace mergers to stay in business

“Despite political turmoil in many countries, a prolonged downturn in the commodities cycle and related currency risk, Africa’s top economies have more than maintained investor interest with strong momentum in mergers and acquisitions across the majority sectors,” notes the report.

According to Control Risks, while the future looks promising, the merger and acquisition activity could be dampened by risks coming from regulatory uncertainties and those associated with cyber security.

Another report by the Merger Market Group shows that a total of 115 merger and acquisition deals worth $26.6 billion were carried out in Africa during the first three quarters of 2013. Last year, the region recorded 290 deals, the highest volume since 2007.

The figure is expected to rise significantly this year supported by low crude prices that are expected to result into divesting from oil and gas exploration assets by existing companies paving way for new investors.