Obama boost for Africa
THE relatively slow pace of merger and acquisition activity in Africa was jump-started by last month’s visit of American president Barack Obama during which he co-hosted the 6th Global Entrepreneurship Summit in Nairobi. Paras Shah, Nairobi partner at Coulson Harney, part of the Bowman Gilfillan Africa Group, says his visit ignited euphoria in both local and international investors.
What Obama’s visit did for Kenya, he says, was to cast the region in a good light, leading to increased enquires from foreign investors. He is confident that benefits will flow from this and result in increased investment in the region.
Private equity deals continued to be the main driving force of merger and acquisition activity in sub-Saharan Africa. Interest in East Africa has come not only from Europe but also from a growing number of local firms as Africa funds are set up in all sectors ranging from financial and retail to manufacturing and real estate. This, he says, has translated into a healthy deal pipeline. He does caution that the risks created by the different competition regimes, even in terms of minority stakes, do provide problems, but says these risks can be mitigated.
With investors’ binoculars now more focused, Shah says increased activity in the smaller deal level is noticeable. Developments in the infrastructure space in relation to road, rail and port are coming to fruition which is encouraging, though the main thrust is expected to come into play in the next two to three years. Increased deal activity in the oil and gas sectors is as a result of the drop in commodity prices and the subsequent sale of assets by exploration companies in order to survive. Activity in this space is expected to continue.
Shah is optimistic that the remainder of the year will pull deal levels up to those seen in 2014. The Chinese remain focused on investing in infrastructure while interest from Southeast Asia lies mainly in oil and gas. Regional players are expected to make their mark over the next two years as they seek to expand their footprint, particularly in the financial sector.