Kenya has experienced a substantial increase in Mergers and Acquisitions activity in recent years. Like in many emerging markets, private equity-driven transactions are one of the main drivers of M&A activity in Kenya. In recent years, the country has seen an increase in interest from private equity and venture capital firms looking to invest in banking and financial services, energy, fast-moving consumer goods and real estate, among other sectors.
The most M&A activity in Kenya in recent years has been in the financial services sector. As Kenya remains a hub for technological innovation, with pioneering mobile money platforms and high mobile-phone penetration, increased activity in the telecoms and Fintech space is expected.
Kenya’s established business environment, robust legal and financial framework, and pillared development agenda provides an attractive investment platform for foreign investors with regional aspirations, and Kenya remains the gateway to establishing and growing an East African presence. In addition, Kenyan companies in financial distress now have more options than ever before. New possibilities for the rescue of ailing companies have opened up as a result of the development of local insolvency laws under the Insolvency Act, 2015. These include administration procedures and other schemes of arrangement. An administrator is appointed to maintain the company as a going concern and achieve a better result for the creditors than liquidation would achieve. During pendency of administration, there is a moratorium on insolvency and legal proceedings against the company. The Insolvency Act, 2015 has also made extensive provisions on voluntary arrangements under which the company can enter into voluntary arrangements with its creditors. This may take any number of options including company restructuring, compromises and mergers and acquisitions. During the period when the voluntary arrangement is in place, the company may apply to the court for a moratorium on insolvency and legal proceedings.
Kenya is also revising and, refining its rules and thresholds in connection with merger control and conforming to best practices. Through the Competition (General) Rules 2019 (“Rules”), the Competition Authority of Kenya (CAK) has, for instance, introduced changes that have the effect of removing small business transactions from merger notification requirements altogether. There are also clearer rules around regional notifications, COMESA in particular. These have the benefit of potentially avoiding duplicate notifications in the region. The Rules became effective on 25 November 2019.
2. Legal Framework for M&A in Kenya
The following laws play an important role in providing for and regulating mergers and acquisitions in Kenya:
- The Competition Act (Chapter 504 of the laws of Kenya) – The key statute regulating mergers and acquisitions in Kenya.
- The Companies Act (No. 17 of 2015, laws of Kenya) – the legal framework for companies in Kenya and has an impact on various corporate aspects of M&A transactions including the structuring and financing of acquisitions.
- The COMESA Competition Regulations and related rules (applicable to Kenya under Treaty).
- In relation to listed companies, the Capital Markets Act (Chapter 485A of the Laws of Kenya) and the Capital Markets (Takeovers and Mergers) Regulations, 2002.
- Other sector specific laws, and applicable tax, real estate laws etc.
HOW WE CAN HELP
As Imperial Registrars we shall be pleased to assist you or your company in complying with all the regulations required in setting up mergers and acquisitions in Kenya. Kindly don’t hesitate to contact us for further assistance on the above. (Info@imperialregistrars.co.ke)