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Monday, January 23, 2017

Private equity deals to increase, says Cytonn

Cytonn Investments Private Equity Real Estate Head Shiv Arora speaking during the release of Cytonn Business and Market Outlook 2017 Report yesterday which projects Kenya’s 2017 GDP growth to be between 5.4% -5.7%. /MONICAH MWANGI
Cytonn Investments Private Equity Real Estate Head Shiv Arora speaking during the release of Cytonn Business and Market Outlook 2017 Report yesterday which projects Kenya’s 2017 GDP growth to be between 5.4% -5.7%. /MONICAH MWANGI

Investment deals in private companies will significantly increase this year driven by high return potential across all sectors and improving ease of doing business, Cytonn says in latest forecast.

The positive outlook is largely backed by an increase in private equity business in the Sub-Saharan Africa.

Cytonn said the first three quarters of 2016 recorded 140 deals. Thirty-three valued at Sh48 billion came from East Africa, with 14 of them whose total value was Sh30.6 billion from Kenya.

In 2017, the firm says, private equity investors will focus on sectors such as financial services, renewable energy, education and information, and communication technology.

“Consolidation in the banking sector will be the key focus in the financial services sector, as small banks consolidate or get bought out, a move that will attract global investors. In addition, the renewable energy sector offers a high potential for wind, solar and geothermal energy generation in the country,” investment manager Maurice Oduor said in the analysis of the Cytonn Business and Market Outlook 2017 Report launched yesterday in Nairobi.

Private investment in the financial sector recorded three deals last year. These include the acquisition of 51 per cent stake in Oriental Commercial Bank by Tanzania’s Bank M, I&M Holdings’ acquisition of 100 per cent stake in Giro Commercial Bank, and 100 per cent acquisition of Fidelity Commercial Bank by SBM Holdings, a Mauritian Bank.

The consolidation in the banking sector follows new regulatory requirements that require each of the 43 commercial banks to raise a minimum core capital from Sh1 billion to Sh5 billion by 2018.

Consolidation is also being considered following the enactment of the Banking (Amendment) Act 2015 that capped interest rates charged on loans.

“For the financial services sector, we expect increased consolidation and more PE investors to take advantage of the cheaper market valuations. Weaker banks will have to merge or be acquired so as to remain competitive and shore up their capital base,” Cytonn said.


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