East Africa’s M&A market has grown in recent years as dealmakers flock to the region to get a slice of growing business and lawyers are starting to follow. A number of multinationals have been making major bids from African nations over the last 18 months.
Analysis by Thomson Reuters shows that 95 acquisitions have taken place involving a party from Kenya, Tanzania or Uganda since 2015. We look at three of the top deals.
International vs local firms in East Africa
Q: Would you still classify East Africa as an ‘emerging market’ in the legal world?
Yes, the legal profession is continuing to evolve and remains young and unexplored. There is significant potential
for growth.
Q: What local or international trends are changing how your firm grows and develops?
Added competition from rival local firms has made us consider exploring different marketing opportunities; we are looking to grow the firm and the best way of doing so. We have grown quickly over the last two years or so and are continuing with an aggressive growth strategy.
International firms are looking more closely at work opportunities in the East Africa region and are engaging more frequently and closely with local firms.
They are doing this by coming to Nairobi and specifically meeting with us and putting on seminars to which the major law firms are invited.
This results in one-on-one partner discussions and meetings to explore work opportunities. International firms are also offering training opportunities to local law firms.
Q: What are the biggest challenges facing domestic firms?
The outdated Advocates Remuneration Order that mandates law firms to charge a minimum scale fee for certain types of work, which results in fees being higher than investors are prepared to pay.
Another challenge is receiving a fair share of the work from international firms on a project in which they partner with local firms. An international firm will charge a significantly higher fee than the local firm.
Q: How do you foresee the East Africa legal market changing in the next 10 years?
I believe that it is possible that more international firms will come into play, opening offices in the region and challenging local firms for the work.
Freeing up of minimum scale fees and moving towards an open market will allow lawyers to charge freely for the work without having to charge a minimum fee.
Old Mutual ups stake in African insurer UAP
FTSE-100 finance business Old Mutual took control of Kenya-based insurer UAP Holdings in July 2015 after buying a further 13.6 per cent stake from investment firm Abraaj for an undisclosed sum.
The acquisition means Old Mutual now owns a majority 60.7 per cent stake in the pan-African financial services group. This follows the business revealing plans to grow customer numbers across the continent to 10m by the end of the decade.
East and Sub-Saharan Africa accounted for 14 per cent of Old Mutual’s adjusted operating profits in 2014, while South Africa – where the company first launched – accounted for 4 per cent.
South African firm Bowman Gilfillan advised UAP while Old Mutual was advised by Webber Wentzel.
Maersk Oil acquisition of East African exploration licences
In February Danish business Maersk Oil completed its purchase of 50 per cent of Africa Oil Corp shares in three onshore exploration licences in the Turkana region of Northern Kenya and two further licences in Southern Ethiopia.
The licences cover an area of 100,000sq km with four of the blocks operated by Tullow Oil and one by Africa Oil Corp. The deal is understood to be worth $845m (£588m) with Africa Oil Corp receiving an initial $350m cash consideration.
The value of the deal was split between the upfront farm-in payment, plus exploration costs, followed by future contingent payments of up to $480m by Maersk Oil for the Lokichar Project.
Maersk Oil CEO Jakob Thomasen said: “We are in a position where we can take advantage of opportunities arising in current market conditions. This investment adds to an already attractive non-operated onshore portfolio for Maersk Oil that includes our 25-year presence in Algeria. This is an important driver of long-term value.”
Lawyers advising on the deal were Simpson Thacher & Bartlett and Vinson & Elkins.
Cipla takes 51 per cent stake in Uganda’s Quality Chemicals
Mumbai drugmaker Cipla Ltd completed its acquisition of a 51 per cent stake in Uganda-based Quality Chemicals (QCL) last summer for $30m.
The deal was routed through wholly owned subsidiary Ciplan (EU) Ltd UK. Incorporated in 1997, QCL imports and distributes pharmaceutical and consumer products. Its turnover in 2014 was $4.98m. The business also owns a 22 per cent equity stake in Cipla’s Ugandan subsidiary, called Cipla Quality Chemical Industries.
The QCL deal is part of Cipla’s wider acquisition strategy in Africa. Last year it also entered into a joint venture agreement with pharmaceuticals businesses in Morocco, in which it is expected to invest $15m. In 2015 Cipla also acquired a 51 per cent stake in a UAE-based pharmaceuticals company for $14m.
Lawyers advising on the Cipla/QCL transaction came from Herbert Smith Freehills and Bowman Gilfillan.
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