NCBA – NIC CBA MERGER, KCB-NATIONAL BANK BUYOUT AND M&AS IN KENYA
CBA and NIC Banks have now merged into NCBA Group PLC and have merged their operations, creating East Africa’s third largest bank. This move further progresses the trend of firms merging to enable quick growth, economies of scale among other benefits.
Kenya Commercial Bank’s (KCB) takeover of National Bank of Kenya also happened in tandem and created a lot of excitement of potential transactions for 2019 in regards to Mergers and Acquisitions (M&As). KCB’s 100 percent takeover of its competitor creates the region’s biggest bank by assets due to the amount of deposits both entities have on their books.
NBK’s acquisition was informed by the need to inject much capital into an institution that ran into financial and management headwinds a few years ago. For everyone associated with NBK i.e. customers, employees and shareholders, KCB’s takeover will steady a struggling behemoth which was eyeing a bailout from the Kenyan Government.
For NBK customers, they will rest easy in the knowledge that their funds will now be backed up by a solid digital infrastructure, an innovative product portfolio and good customer service. Shareholders will sleep easy in the knowledge that their investments will be absorbed by a company with a record of strong financial performance.
From KCB’s perspective, this acquisition is a golden opportunity to extend its already bulky customer base and explore new markets. By acquiring NBK’s assets, KCB don’t have to worry about high costs associated with market penetration.
Firm’s that have reached the peak of their profitability or losses seek out M&As to explore new opportunities in order to boost their bottom lines. They also want to leverage on new partners experiences to introduce new products and services, reduce their overheads, gain competitive advantage and financial leverage.
M&As helped inject Kes. 66 billion into our economy last year with the Competition Authority of Kenya (CAK) receiving 150 notifications for these ventures.
Half of these transactions involved private equity firms which reveals Kenya’s attractiveness as a viable investment destination. Most of them took place in the manufacturing, real estate, distribution, investments, advertising and agricultural sectors.
The flagship transaction of 2018 was Vivo Energy’s 100 percent acquisition of competing petroleum distributor Engen International Holdings.
In addition to the CBA-NIC and KCB-NBK mergers, other high profile M&As expected to take place in the course of 2019 include the merger of telecommunication firms Telkom and Airtel and the acquisition of Kenol-Kobil by French energy firm Rubis PLC.
The telco merger, which will see both outfits trade under a new unit called Airtel Telkom, is being created to optimize both businesses and to counter Safaricom’s dominance.
Rubis’ takeover of Kenol-Kobil is expected to drive up competition in Kenya’s energy sector dominated by fellow French company Total, Vivo and Oil Libya.
As 2019 comes to a close it is anticipated that many more mergers and acquisitions will be seen in 2020 as more companies look to consolidate their market positions and reposition to respond better to the changing market environment and players and take advantage of the funds available in the Capital Markets looking for viable investees.
Paul Kihiu – Business Development Director
C&R Group
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