According to global audit, tax and advisory services firm KPMG, most of the deals have led to firms collapsing as some of them are done and closed in a hurry and with the investors having less knowledge about the target markets.
KPMG East Africa CEO Josphat Mwaura says with more mergers and acquisitions expected to double in the next five years in Africa, there is need for advisory firms in the various regions to take a key role and guide the investors to get the long term value out of the deals.
“We want to help the businesses in the continent to grow where an individual from employment transitions into entrepreneurship then converts their entrepreneurship into big assets with other people and so on,” Mwaura said while introducing new Pan-African and transaction advisory team.
KPMG will be investing over Sh8.4 billion under its advisory segment in Africa to help investors go through smooth and profitable huge business transactions.
Africa’s foreign direct investments flows are expected to hit Sh12.5 trillion by 2017 from the current Sh6.7 trillion.
“We are expecting M&A across all sectors throughout Africa from global companies looking to grow in Africa, private equity sector and African conglomerates looking to expand in the continent,” KPMG head of financial advisory services in Africa Dapo Okubadejo said.
“It is encouraging that for the first time in almost two years, both the capacity to transact and the appetite for deals have increase over same periods,” Okubadejo noted.
In recent years mergers and acquisitions activities have become important channel for investment in for both global and local market players, allowing companies to consolidate their positions in African markets, contributing to better access and competitiveness.
Energy, mining and utilities are expected to remain the main catalysts for takeovers in the continent.
Over the last two years, there have been 17 deals in the East Africa region at a value of Sh402 billion.
“Africa’s market is expected to benefit from the growing interest of global companies in the continent’s potential, especially as our home enterprises are ripe, making the opportunities for acquisition. This has been evidenced in the Interconsumer and L’Oreal deal announced last week here Kenya,” Mwaura noted.
Government efforts in some African countries to promote business friendly environments have attracted and will continue to attract foreign investors.
Kenya for example, is in a privileged position as Eastern African hub, following a peaceful transition.
According to the 2013 Deloitte East Africa Private Equity Confidence report released last week, Kenya attracted six private equity deals in 2012, the highest in the region.