By Wambua Mutua
Dealmakers are looking forward for investments and M&A activities to pick up in last quarter of 2020.
East Africa investments are set to remain at low levels through 2020 with full recovery unlikely until first quarter of 2021 as the world continues to grapple with the current pandemic and its economic consequences. However, there are indications of continued investments in specific sectors and specific countries within the region. Mergers and Acquisitions (M&A) activity could start to pick-up, with some pockets of resistance in certain sectors such as tech, agribusiness, energy and healthcare. There are also signs that countries which will have managed to control the pandemic in coming few months will be in a more advantageous position.
As governments in the region reopen economies ravaged by the pandemic, investment committees are starting to think about dealmaking, as many have raised funds targeted to various sectors in the region. Industries such as technology and agri-tech may lead the way out, with deals also coming from badly hurt sectors such as tourism, hospitality, aviation and manufacturing.
What I have learned from the past is that sharp declines in the M&A market have led to sharp recoveries, so I am expecting a strong first quarter of 2021 to have higher levels of M&A.
Most investors have currently put negotiations on investment projects on hold but are set to deploy capital as soon as there is some confidence in the business environment. On the other hand, savvy investors with a long-term view, to buy under priced assets or acquire strategic assets will be set to gain tremendously because the markets will come out strong in long-run.
I have witnessed a trend whereby more companies are holding onto assets too long with considerable disruption of businesses which has resulted to delay in capital allocation decisions. Many investors and businesses will need to reshape their portfolios in short-to-medium-term.
There will be some industries like tourism, horticulture, energy (specifically mining reliant countries), manufacturing, financial sector and hospitality that suffered a double hit from the pandemic and may look to take an aggressive approach in re-align their portfolios.
In a different note, a market like East Africa and more so the Horn of Africa which is defined by disruption, finding the right data and insights can be a key to unlocking competitive M&A and investment advantage. […]