Most firms are projected to continue consolidating their operations this year in a bid to strengthen their balance sheets and make a turnaround on subdued businesses activity after a period marked by capital inadequacy.
Globally, mergers and acquisitions (M&A) are expected in sectors including technology, healthcare, pharmaceuticals and businesses such as food and retail.
Analysts have predicted a continuation of the trend from last year, with the deals expected to be saturated in the banking and insurance sectors.
The activity may see entry and market positioning of foreign investors into the country, even as the analysts decline to mention the actual growth in the foreseen activity.
The Competition Authority of Kenya (CAK) said it has received applications from tmanufacturing, financial services and insurance sectors.
“The applications we have received this financial year are mainly from the manufacturing sector. However, we continue to receive applications from other sectors, including financial services and insurance,” CAK – Director, Competition and Consumer Protection Boniface Makongo told the Business Daily .
“Due to the Covid-19 pandemic, competition agencies are likely to experience an upsurge in joint venture applications and distress mergers, more so from the airline industry. It is also anticipated that there will be increased merger activity in the online and e-commerce space.”
In a report on insurance, investment bank, EFG Hermes forecast activity in both listed and non-listed space due to recorded losses, capital inadequacy or bad operating metrics.
The report pointed to some of the companies including Kenya Re and CIC Insurance, even as the investment bank said it ‘would not speculate on the probability of these aforementioned transactions.’
RISK REGIME
Some of the deals that were announced last year such a transaction between Jubilee Holdings and Allianz SE are expected to close this year or get back on track.“We are highlighting viable M&A opportunities within the insurance sector,” Mr Muammar Ismaily, research analyst at EFG Hermes said.“We believe it is hard to speculate on the actual number of M&A transactions. However, it is safe to assume that with recent acquisitions or by recent foreign entrants that M&A activity will continue.”The expected mergers and acquisitions by insurance firms are expected to be driven by the risk-based capital (RBC) policy that was implemented in June 2020, but the National Treasury extended the policy by six additional months tas a support measure during the pandemic.The regime has increased standard capital for general business from Sh300 million to Sh600 million or 20 […]
