Overview of Mergers and Acquisitions Activity in Kenya

Kenya has experienced a substantial increase in Mergers and Acquisitions (“M&A”) activity in recent years. The Deal Drivers Africa Report, published by Mergermarket, ranks Kenya among Africa’s most sought-after country for M&A transactions. Additionally, until the onslaught of the COVID-19 pandemic, M&A activity in the East Africa region had increased significantly in recent times, with Kenyan deals dominating the market. The East African regional economy (in which Kenya has the largest economy) continues to be a key driver for sub-Saharan Africa’s growth.

Like in many emerging markets, private equity-driven transactions are one of the main drivers of M&A activity in Kenya. In recent years, the country has seen an increase in interest from private equity and venture capital firms looking to invest in banking and financial services, TMT, energy, fast-moving consumer goods and real estate, among other sectors.

The most M&A activity in Kenya in recent years has been in the financial services sector. As Kenya remains a hub for technological innovation, with pioneering mobile money platforms and high mobile-phone penetration, increased activity in the telecoms and Fintech space is expected.

With global crude oil prices stabilising, oil discoveries in Kenya will hopefully attract more foreign interest in the country for exploration activities in oil and gas, both offshore and onshore. Depending of the commercial viability of the oil finds, there may be potential for multiple deals in the oil and gas sector.

Kenya’s established business environment, robust legal and financial framework, and pillared development agenda provides an attractive investment platform for foreign investors with regional aspirations, and Kenya remains the gateway to establishing and growing an East African presence. In addition, Kenyan companies in financial distress now have more options than ever before. New possibilities for the rescue of ailing companies have opened up as a result of the development of local insolvency laws under the Insolvency Act, 2015. These include administration procedures and other schemes of arrangement. An administrator is appointed to maintain the company as a going concern and achieve a better result for the creditors than liquidation would achieve. During pendency of administration, there is a moratorium on insolvency and legal proceedings against the company. The Insolvency Act, 2015 has also made extensive provisions on voluntary arrangements under which the company can enter into voluntary arrangements with its creditors. This may take any number of options including company restructuring, compromises and mergers and acquisitions. During the period when the voluntary arrangement is in place, the company may apply to the court for a moratorium on insolvency and legal proceedings.

Kenya is also revising and, refining its rules and thresholds in connection with merger control and conforming to best practices. Through the Competition (General) Rules 2019 (“Rules”), the Competition Authority of Kenya (CAK) has, for instance, introduced changes that have the effect of removing small business transactions from merger notification requirements altogether. There are also clearer rules around regional notifications, COMESA in particular. These have the benefit of potentially avoiding duplicate notifications in the region. The Rules became effective on 25 November 2019.

It is understood that countries like Japan are seeking to diversify the range of trade partners in Africa and encouraging investments in the continent. The two biggest sectors for Japanese investment in Africa are mining and hydrocarbons (being the main constituents of oil and natural gas). The most important Japanese exports to Africa over the past decade have been motor vehicles. Toyota and Nissan dominate throughout the continent. Toyota Tsusho in particular has sought to expand its footprint on the African continent since the acquisition of CFAO in 2013.

Whilst M&A activities involving Japanese firms in Africa have been more modest compared to other developed countries, there are signs that this will change. In 2018, the Kenyan Government signed a USD94-million loan agreement with the Japan International Cooperation Agency (JICA) for investment in the Olkaria I geothermal power plant rehabilitation project. The investment will be used to add a production capacity of 51 MW to the production units 1 through 3 of the Olkaria I plant, 17 MW each.

2.Legal Framework for M&A in Kenya

The following laws play an important role in providing for and regulating mergers and acquisitions in Kenya:

  1. The Competition Act (Chapter 504 of the laws of Kenya) – The key statute regulating mergers and acquisitions in Kenya.
  2. The Companies Act (No. 17 of 2015, laws of Kenya) – the legal framework for companies in Kenya and has an impact on various corporate aspects of M&A transactions including the structuring and financing of acquisitions.
  3. The COMESA Competition Regulations and related rules (applicable to Kenya under Treaty).
  4. In relation to listed companies, the Capital Markets Act (Chapter 485A of the Laws of Kenya) and the Capital Markets (Takeovers and Mergers) Regulations, 2002.
  5. Other sector specific laws, and applicable tax, real estate laws etc.

3.Effects of COVID-19 on M&A in Kenya

At the start of 2020, the Central Bank of Kenya (“CBK”), the regulator of banking business in the country, projected that Kenya’s economy would grow by 6.2% in 2020, up from 5.8% in 2019. CBK has later revised this down to 3.4% as a result of the disruption caused by the global pandemic, COVID-19. McKinsey (a management consulting company) estimates that GDP growth will decline to 1.9%. Due to the uncertainty in the financial markets and the impact of COVID-19 on most business operations and revenues, M&A activities are expected to slow down with efforts being focused on ensuring safety of employees and survival of businesses.

The COVID-19 outbreak has had a significant impact on global markets, adversely affecting both demand and supply. The pandemic has meant that some corporations are in financial distress because of the crisis, and may have to merge with or be taken over by other firms.

We also expect there to be a wave of restructuring and business rescue applications by companies unable to survive in their present form.

Distressed companies are attractive acquisition targets. Their stock and their debt often trade at prices reflecting the difficulties they face, and they may be under pressure to sell assets, business or securities quickly to raise capital or pay down debt. Under such circumstance, even a “good” assets, business or securities may have to be sold. Accordingly, prospective acquirers may have an opportunity to acquire attractive assets, business or securities at a favourable price. This is likely to result in an increase in M&A transactions. Although there are multiple options to achieve such transactions such as share purchase, asset sale, business sale, merger, demerger and others, the transaction may be often structured as a share sale or an asset sale, depending on the conditions of the target assets and/or company together with risk appetite on the part of potential buyers. A share sale would be attractive to a distressed seller since it is simpler, faster and the seller is able to transfer liabilities in the target company. On the other hand, an asset sale may be more appealing from a buyer perspective since they can choose what assets they want in addition to isolating the buyer from liabilities of the target company.

Undertaking M&A transactions in a distressed market may however mean that buyers and sellers alike have more to consider than in a typical M&A transaction, and significantly less time to do so. The due diligence process would have a challenge of time pressure. Also the logistics of disclosure would have to be considered. A virtual data room would be inevitable and even a virtual site visit or an on-line management interview could be discussed. Potential targets will probably need to be assessed more carefully in terms of resilience (including financial covenants in a loan agreement), which impacts valuations. The share transfer or business transfer agreements will be structured to reflect the situation of the target and the purchasers will look to obtain more robust protections. These may be in the form of walkaway provisions on a material adverse change together with comprehensive indemnity and warranty provisions. The parties may also agree to price adjustment provision, deferred payment or earn-out mechanisms.

Notwithstanding the unprecedented government and non-governmental interventions around the world to mitigate disruption, the precise impacts of the pandemic are unknown. As it continues, businesses around the world will no doubt face significant and unprecedented challenges but opportunities will also emerge for those with the necessary resources and appetite for risk.

4.M&A Transactions in Kenya

Some recent M&A transactions across different key sectors in Kenya include:

I.Financial Services Sector

De La Rue Kenya Limited (a subsidiary of De La Rue PLC) wholly acquired by an American company, HID Corporation Ltd. De La Rue focuses on printing a wide range of security documents, such as debit and credit cards, and a wide range of electronic government identity solutions.

Prior to the merger, De La Rue PLC was in significant financial distress. It reported a £12.1-million (KSh1.59-billion) pre-tax loss for the six months prior to 28 September 2019, compared with a £7.1- million (KSh934.64-million) profit reported over the same period in 2018. De La Rue’s sale of its Kenyan unit could be part of the British firm’s restructuring plan to stay afloat. The firm is also fast tracking its restructuring plan, which includes a reduction in overhead costs.

II.Banking Sector

The latter part of 2019 was characterised by significant deals in the banking sector. Kenya's banking industry has had a flurry of deals in the last three years after the government capped interest rates, thereby hurting earnings for many banks and forcing them to look for ways to preserve earnings. The CBK continues to encourage consolidation in the banking sector through M&A in order to create bigger and more resilient institutions that can weather shocks, fund large infrastructure projects and charge affordable rates of interest. The highlights in the banking sector in 2019 were:

  1. Kenya Commercial Bank (KCB) acquired the National Bank of Kenya (NBK): CBK approved the 100% acquisition of NBK by KCB Group in terms of the Banking Act. The acquisition is expected to strengthen both institutions, leveraging their respective well- established domestic and regional corporate, public sector and retail franchises.
  2. Merger of NIC Group PLC and Commercial Bank of Africa Limited: The acquisition led to the formation of one of the biggest banks in Africa based on assets, known as NCBA Bank Kenya PLC. CBK announced the merger of the two banks, effective September 30, 2019. The NCBA group seeks to open more branches in Kenya and the East Africa region as it eyes more small and medium sized businesses. CBK stated the merged entity will have a combined market share of 9.9% and a customer base of over 40-million people in East Africa.
  3. Commercial International Bank acquisition of Mayfair Bank Limited: Egypt’s public listed Commercial International Bank (“CIB”) has concluded its acquisition of a controlling stake in Mayfair Bank Limited, making it the latest entrant into Kenya’s banking sector. CIB, one of Egypt’s leading private sector banks, has acquired a 51% stake in Kenya’s Mayfair Bank by way of a USD35-million capital injection. It is the first Egyptian bank to venture into the Kenyan market. Its entry will strengthen the trade and investment ties between Kenya and Egypt. CIB plans to expand the bank by focusing on the retail segment, corporate banking and trade finance. It hopes to eventually turn Mayfair into a hub for trade finance in Kenya and the neighbouring countries.
  4. Access Bank PLC acquisition of Transnational Bank PLC: In January 2020, the CBK agreed to allow Nigerian lender, Access Bank PLC to acquire a 100% stake in Kenya’s Transnational Bank PLC, for an undisclosed amount. The transaction was concluded in July 2020. Access Bank’s entry into the Kenyan market, is a gateway into East Africa.

III.Petroleum Sector

With respect to the down-stream petroleum space, Rubis Energie SAS acquired previous stock exchange listed firm, KenolKobil (now Rubis Energy Kenya PLC). Rubis Energie SAS is a subsidiary of Rubis SCA, a French international firm that deals in the storage, distribution and sale of petroleum, liquefied petroleum gas, food and chemical products.

The transaction was a public take-over and resulted in Rubis taking 100% control of KenolKobil. The deal value was approximately USD350-million. The deal is a vote of confidence in the Kenyan economy, which is a gateway into the East and Central Africa region.

IV.Retail Sector

Adenia Partners (a PE firm investing in Sub-Saharan Africa) in 2019 announced that it had completed a majority investment in Quick Mart Limited, which operates a chain of 11 supermarkets in Kenya, with nine stores located in neighbourhood estates in Nairobi, and another two stores in the town of Nakuru. The transaction had been structured through Adenia Capital (IV), a EUR230-million investment fund. The investment will be utilised to expand Quick Mart’s store network in convenient neighbourhood locations, as well as strengthen operational efficiencies that are aligned to international retail best practices.

This transaction also paved the way for the subsequent merger of Quick Mart with Tumaini Self Service Limited, another supermarket retailer in Kenya that Adenia acquired in 2018. Quick Mart and Tumaini currently have a combined store network of 25 stores, making the merged entity the third largest retailer in Kenya by store network; thus, Adenia becomes the majority owner of the combined company.

V.Education Sector

Within the education sector, Actus Equity, acting through its Kenyan subsidiary Actus Education Holding AB (Actus Holding), acquired 22.32% of the issued share capital of the Riara Group of Schools, giving Actus Holding a controlling stake.

VI.Fast Moving Consumer Goods

Godrej Consumer Products Ltd (GCPL), the consumer arm of the larger Godrej Group, a leading emerging markets company from India, announced the acquisition of the balance 25% stake in Kenyan-based Canon Chemicals Ltd for Kshs1.5-billion. The deal was made through Godrej East Africa Holdings, which is its wholly owned subsidiary. Godrej Consumer Products Ltd ranks among the largest household insecticide and hair care players in emerging markets. Canon Chemicals Ltd is a manufacturer of consumer products. It manufactures and distributes home and personal care products. The Godrej Group had earlier acquired a 75% stake in Canon Chemicals Ltd in 2016. This deal reflects its commitment to scaling up throughout Africa.

VII.Renewable Energy Sector

The Japanese firm, Sumitomo Corp., invested in M-KOPA Holdings Limited. M-KOPA empowers homes and small businesses through an advanced pay-as-you-go platform– unlocking solar, information, technology, finance and opportunity for millions of people. Through this investment, Sumitomo aims to launch a new business related to distributed power sources and contribute to improving the living standards of people inhabiting non-electrified areas. Sumitomo will help M-KOPA achieve further growth by capitalizing on its expertise in the construction and operation of power generation plants, contributing to the delivery of sustainable clean energy to more people.


The Japanese company Kepple Africa Ventures has invested in more than 50 African technology start-ups. The company has so far invested in countries including Kenya, Nigeria, Ghana and Cameroon. Kepple helps link the African and Japanese start-up ecosystems and helps its portfolio companies access follow-on funding. In Kenya, Kepple has funded companies involved in logistics, vehicle manufacturing, health platform, ecommerce platform, music platform, and payments platform.

These M&A transactions highlight the attractiveness of Kenyan business to the global marketplace. These inbound investment transactions originate from Japan, the USA, France and India, into the global market, and throughout Africa. Even with a slowdown in activity, we expect to see the global investment into Kenya continue. This is due to price-adjustments of an enterprise value as a result of COVID-19 and the long-term growth prospects of Kenya.