Mr. Gichinga is Chief Economist at Mentoria Economics By Ken Gichinga
As the prospects of an economic recovery begin to take shape, there is a deep desire among Kenyans to rebuild wealth in the new economy. For many, there is a great need to diversify beyond the traditional assets and venture into new areas. Most Kenyans will fondly remember with great nostalgia Safaricom’s Initial Public Offer in 2008 which was oversubscribed by 532%, attracting 860,000 applicants, most of whom have been handsomely rewarded from this investment. The country is eager to return to this golden era of vibrant participation and wealth creation through publicly listed companies. While good IPOs might be few and far between, the economic environment is pointing towards industry consolidation and a rise in public mergers and acquisitions. These too can have considerable benefits to local investors if well executed. For this to happen there needs to be a smooth collaboration between all the relevant institutions in the ecosystem, not least the courts, industry regulators and other state agencies.
Building a strong tradition of well-managed, public mergers and acquisition is a worthwhile goal that can inspire confidence and position Nairobi to be a global financial centre where complex transactions are effectively managed. Critical institutions such as the courts will need to function at the highest possible level, providing effective direction in a timely fashion. A judicial framework that is frequently updated on emerging trends in mergers and acquisition could provide investors with much-needed confidence if any court petition were to arise. During the acquisition of National Bank of Kenya by KCB Group, a petition was filed in court on the grounds that the deal was marred with irregularities and that most of the details on the merger were scanty. Fortunately, the court was swift in its ruling and determined that the petition lacked merit as it failed to understand the independent legal framework for the acquisition of shares in publicly listed companies under the Capital Markets Act and Capital Markets (Take-overs and Mergers) Regulations 2002.
Regulators also have a key role in fostering smoother mergers and acquisitions. Institutions such as the Competition Authority are particularly important in ensuring there is no unwarranted concentration of economic power. Given the diversity of issues that frequently come before regulators, it becomes imperative that there is constant engagement and communication to sensitize investors on regulatory developments in M&A. Such efforts ensure there […]
