Corporate deals decrease to Sh6.8bn in first quarter

Value of corporate deals in Kenya fell by at least a fifth. Photo | Fotosearch 

By CHARLES MWANIKI

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Summary

• Only Sh6.9 billion ($69.4 million) were closed in the four months to April, compared to Sh8.8 billion ($88 million) in the same period last year.
• Kenya remains behind African economic powerhouses such as South Africa, Nigeria, Egypt and Morocco, each with deals exceeding $900 million (Sh90 billion), in the period.
• Only South Africa at $7.8 billion (Sh780 billion) outperformed Kenya last year.

The disclosed value of corporate deals in Kenya fell by at least a fifth in the first four months of the year compared to a similar period last year, reflecting the tougher economic climate following an extended politicking season.

Data on African deals compiled by risk and research firm Stratlink shows only Sh6.9 billion ($69.4 million) were closed in the four months to April, compared to Sh8.8 billion ($88 million) in the same period last year.

While outperforming her fellow East Africa Community members in value of deals, Kenya remains behind African economic powerhouses such as South Africa, Nigeria, Egypt and Morocco, each with deals exceeding $900 million (Sh90 billion), in the period.

“Countries such as South Africa, Nigeria, Egypt and Kenya remain the pockets of deal activity in the continent as companies pursue regional facing growth strategies,” said Stratlink senior analyst Julians Amboko.

“Mergers and acquisitions still command the lion’s share, at 38.3 per cent in 2018 versus 25.5 per cent in 2017. This is reflective of the spirited attempt by companies to maintain a competitive foothold by leveraging synergies against the backdrop of a business environment that was largely affected by the 2014-16 commodity price downturn.”

For Kenya, the slowdown in growth of the economy at 4.9 per cent last year compared to 5.9 per cent in 2016 affected businesses negatively.

Last year Kenya accounted for deals valued at $3.5 billion (Sh350 billion), largely due to the large ticket sale of a 35 per cent stake in Safaricom by British telco Vodafone to its South African subsidiary Vodacom for Sh270 billion ($2.7 billion).

Only South Africa at $7.8 billion (Sh780 billion) outperformed Kenya last year.

While the merger and acquisition space has been fairly active recently in the country, there has been a shortage of capital market deals such as IPOs and corporate bond issues.

In 2017, only EABL issued a corporate bond while the NSE’s last IPO was issued in October 2015. There was only one listing by introduction last year—the Barclays NewGold exchange traded fund in March.