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Merger and acquisition actions moves from West to East Africa in 2016

Canary Wharf, London, where Clifford Chance are based. (Image source: David Iliff/CC-BY-SA 3.0/Commons)

International law firm Clifford Chance show that the African merger and acquisition (m&a) footprint is increasing in 2016, despite the market deal volume being down a third throughout Africa in 2016

Clifford Chance's recent publication of its annual Global M&A Trends report, "A Global Shift", helps dealmakers and companies navigate a new and shifting terrain for deals globally, including Africa.

The power sector was particularly active in Africa in 2016, with Clifford Chance acting on almost twice as many deals in the sector as in the previous year. Other sectors with strong growth were agribusiness, education, and the financial services. 

There was also a noticeable continental deal shift from West to East Africa, where Clifford Chance advised on 50 per cent more deals than in 2015. While concerns over FX risk and an economy adjusting to a sustained period of low oil prices dampened appetite for M&A in Nigeria, Kenya and other East African jurisdictions became more favoured investment destinations. 

Spencer Baylin, Clifford Chance Global Head of Emerging Markets M&A, said: "Delivering deals in difficult markets requires investors to be creative in their approach to agreeing and structuring transactions. We are seeing an increased use of bespoke purchase price mechanisms to protect against key risks and to bridge valuation gaps.

"Other risk mitigation strategies include investing in countries perceived to be regional hubs through which growth in nearby economies can be accessed, and establishing multi-jurisdictional platforms to build scale and a natural hedge against FX and individual country risk." 

The shift in focus to the East was echoed by Nicholas Hughes, Head of Clifford Chance East Africa Practice.  Speaking last week from Risk and Raising Capital 2017, a conference organised by Clifford Chance in Nairobi, he commented, "Multiple years of significant economic growth have made Kenyan companies operating in many sectors appealing targets for international private equity houses. 

"Despite some high profile bank failures in the region, businesses active in the insurance and broader financial services sector continue to attract new capital. And a surge of investment in off-grid solar companies has cemented East Africa's reputation as a global leader in this rapidly growing industry.”

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