NAIROBI, DAR LEAD IN E.A. REGION'S M&A DEALS

I&M Bank was a beneficiary of the deals with City Trust investing $335 million into its business.

Kenya and Tanzania are leading in mergers and acquisitions in East Africa, having recorded over 150 deals since 2010.

According to KPMG’s DealSpace: East Africa report, most of the deals were in the mining sector followed by financial services, energy and communications. However, manufacturing, tourism, healthcare, wholesale and retail trade performed poorly.

Among the deals were the $4.8 billion acquisition of African Barrick Gold in Tanzania in 2010, the sale of oil blocks by Tullow Oil Plc for about $3 billion in 2011, the $335 million investment by City Trust in Kenyan I&M Bank in 2011, and the $243 million investment by Vodacom Group in Vodacom Tanzania in 2013.

The total value of publicly disclosed M&A deals in Kenya in 2011 reached $667 million, but dropped to $119 million in 2012. “This was followed by recovery, with the value reaching $863 million in 2013,” said the report.

Activity in Kenya rose from 15 deals in 2010 to 44 deals in 2013. Financial services had the largest increase from two to 18 deals. These include acquisition of a majority share of Genesis Kenya Investment Management by Centum Investment, and the acquisition of Real Insurance by British-American Investments.

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For Tanzania, the energy and mining sectors were most active. The deals included the $4.8 billion acquisition of African Barrick Gold in 2010 and the $1.3 billion acquisition of three oil blocks by Pavilion Energy in late 2013.

KPMG director of transactions and restructuring Ernest Cheruiyot said Tanzania has consistently recorded strong growth figures in recent years and should continue to do so.

“Looking ahead, the banking and telecommunication sectors will continue to support services growth, while increased electricity generation capacity will benefit the expansion of the manufacturing industry,” he said.

After dropping from $211 million in 2010 to $57 million in 2011, Tanzania’s total deal value increased to $366 million in 2012 but dropped to $306 million in 2013.

Mining push

The number of M&A deals in Tanzania has declined from 31 in 2010 to 17 in 2013. The mining sector accounted for 52 per cent of deals in 2010, 38 per cent in 2011, 40 per cent in 2012, and 59 per cent in 2013.

Large mining deals include the $19 million investment by Peak Resources in Zari Exploration and the $18 million acquisition of Lake Cement by an undisclosed buyer.

The energy sector made a significant contribution in 2010 and 2011. Deals include the acquisition of natural gas exploration blocks by ExxonMobil, and the acquisition of Baobab Energy Systems Tanzania.

KPMG considers Uganda and Rwanda as future hotspots for mergers and acquisitions. Uganda’s economy has shown remarkable recovery following a slowdown in 2012 but the current account deficit remains wide.

The East African