Kenya enacts new guidelines for mergers and acquisition to improve efficiencies

KENYA – Kenya has ushered in a new approval regime for mergers and acquisitions after the country enacted the Competition (General) rules 2019 which will ensure the process is faster despite feared to be costly.

The domestication of the new Common Market for Eastern and Southern Africa (COMESA) rules will eliminate double notifications.

Companies based in Kenya with at least two-thirds of their combined turnover or assets generated or located in the country will only need approval from the Competition Authority of Kenya (CAK) to merge.

Merger transactions that meet the Comesa notification threshold should make a filing only to the Comesa Competition Commission (CCC) and not the CAK.

The competition authority said the new regulations address dual notification to CAK and CCC, thus eliminating red tape and bureaucracy.

Companies with a minimum combined turnover or assets of US$10 million that want to merge must notify the authority, while those with assets of below US$5 million do not need approval.

The regulations stipulate that where at least two-thirds of the merging companies’ combined turnover or assets are generated or located outside Kenya, the companies will only require the CCC approval.

According to Kenyan Digest, under the previous rules companies pursuing mergers in Kenya were subjected to an expensive and rigorous approval process by both the CAK and CCC, often causing delays in transactions and leading to collapse.

In the new rules, Kenya has also doubled the merger filing fees to US$40,000 for companies with turnover and assets in excess of US$500 million, US$20,000 for companies with a turnover of between US$100 million and US$500 million, and US$10,000 for those with a turnover of between US$10 million and US$100 million. Those below US$10 million will not pay any fees.

Kenya adopted the regulations from Rule 4 of Comesa Rules on the Determination Merger Notification Thresholds and Method of Calculation adopted in 2019.

The new rules came into effect on December 6, 2019, and Kenya is the first of the 21 Comesa member states to domesticate them.

“This is good for business as it creates certainty with regard to the notifiability of mergers involving two or more member states and clearly may encourage more mergers and acquisitions (M&A) to be implemented due the elimination of over-regulation,” Willard Mwemba, Comesa Competition Commission head of M&A told The EastAfrican.

Last month, a proposed transaction between regional lender Equity Group Holding and Atlas Mara Ltd collapsed after the parties failed to sign detailed transaction agreements within the stipulated time, leading to the lapse of the binding term sheet.

CAK communications and external affairs manager Mugambi Mutegi said the rules are intended to raise investments in the country by exempting mergers that have a benign competition effect, like small and medium enterprises, from mandatory notification.

In the EAC, Uganda is the only country without a competition body.

Kenya has recently recorded high profile M&A deals — KCB Bank acquisition of National Bank, French company Rubis Plc acquisition of KenolKobil, impending Telkom and Airtel merger, and the NIC Bank and CBA Bank tie-up.