In an opinion piece in the Business Daily Sheel Gill of KPMG East Africa suggests that most small and medium sized companies in the region may have to shape up by merging with bigger ones or shape out by getting acquired all together in order to survive the coming growth boom fueled by the oil money.
Clearly, rising business confidence due to reduced political risk, consumer demand and improving economic prospects in the region after the discovery of oil and gases deposits could see more firms in the technology; mining and financial services sectors look to M&A for growth and expansion.
“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.” – Gill (History of M&A in Kenyan banks)
For these Gill cites the I&M merger with City Trust that will see the former reverse list on the Nairobi Security Exchange. This will be first reverse listing in a region more accustomed to IPO’s, right issues and cross-listings.
M&A’s are not entirely new in East Africa. The most recent ones being the failed KenolKobil/Purma Energy takeover bid, CFC/Stanbic merger, the botched BOC/Carbacid merger, Craft silicon/Fanisi Capital, Taipan/Lion Petroleum inc merger, Marsh Ltd/Alexander Forbes acquisition, Emerging Capital Partners/Java 90 percent stake buyout, and many others.
Most of the nearly 20 documented M&A last year took place in Kenya.
But with more of these M&A’s comes regulatory challenges that could see some listed firms exit the exchange in the near future.