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Boom for EA mergers and acquisitions

After 17 years of handling Corporate Finance and Transactions in Germany and the UK, a return home is timely what with the immense growth prospects this region has to offer.

In the short time I have been here, I have noticed the positive impact the vast improvements in infrastructure has had on businesses — exponential growth.

Mergers and acquisitions

Companies in Kenya have the ability to implement change rapidly. Growth brings with it many challenges; first, management has to find innovative ways to increase shareholder value as competition gets fierce.

This is the main reason for having mergers and acquisitions (M&A) as well as financing on the company’s strategy and board agenda. Growing companies have the advantage of making M&A as a way of life.

I expect to see a boom in M&A, transactions and funding projects in the near future. Take the banking sector as an example. We have 46 banks in Kenya, 67 per cent of which are in the category of small, all competing for increasing business. For such banks to grow and increase shareholder value, there will be need for a series of consolidations across the sector.

We have already seen the beginning of this with the announcement of I&M and City Trust. Such mergers bring with them challenges that can distract management from the day to day business resulting in a reduction of value.

According to a global survey conducted by KPMG, 32 per cent of corporate buyers have seen a reduction in value largely due to exclusion of synergies when valuing and lack of a comprehensive post-merger integration plan.

The PPP Bill

The recent approval of the PPP law will attract foreign investors who have not previously been involved with infrastructure projects in our region. The PPP Bill 2012 provides a clear framework and process providing foreign investors a level of comfort in which they like to operate.

For example, as county governments begin to implement an infrastructure improvement plan, I envisage that people, the Government, and service providers will benefit from the PPP Bill.

Such reforms support the forecast growth in Foreign Direct Investment (FDI) to Kenya by 65 per cent over the next four years. This has the advantage of attracting the world’s best know how across all sectors.

Once giant global PE houses begin to see returns and the vast opportunities for investments here, our local businesses will begin to realise their investments and reap the rewards. PE houses are yet to consider opportunities in the agricultural, horticultural and forestry sectors, the sectors that contribute to 21 per cent of our GDP.

The FDI will come in many forms — mezzanine loans, venture capital funds, Islamic finance, retail bonds, to name a few — hence knowing what is the most suitable form of funding for a business is a challenge.

Opportunity on our doorstep

Finally, we have an enormous opportunity at our doorstep — a forecast GDP growth of 5.2 per cent, talented people, depth and breadth of resources (ranging from funding to natural resources) and with it a slowdown across the developed economies.

Couple this with our advantageous position of being able to select the best of the best from the rest of the world — and I can only think BIG.

About Sheel Gill

Sheel Gill is the Head of Transactions and Restructuring - East Africa. She has 19 years of financial and accounting experience, having qualified as a UK Chartered Accountant in 1996. She has been responsible for a range of audits, corporate finance and transaction projects to a diverse portfolio of clients. Sheel has worked in Kenya, UK and Germany across all sectors. She has experience of leading some of the largest acquisitions, vendor and refinancing due diligences and demergers.

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One Response to Boom for EA mergers and acquisitions

  1. Davidgomes May 5, 2014 at 1:18 pm #

    Mergers and acquisitions are a noticeable sensation ready to go. It give extra development and benefit good opportunities. Mergers and acquisitions may be embraced for a few reasons, some of which are profitable to shareholders while some are most certainly not. Now and again, such arrangements may be attempted to spare on charges. The amassed misfortunes of the target organization could be set off against benefits of the organization that is assuming control, bringing about critical assessment reserve funds. Thanks for sharing the post.

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