Advisory firm Akanar sees more mergers in Egypt

By Patrick Werr / Reuters
First Published: March 1, 2010

CAIRO: Corporate finance advisers Akanar Partners, which is working on six merger and acquisitions deals in Egypt, sees more transactions flowing with the improving economy and from the consolidation of family-run businesses.

Akanar, which specializes in mid-market mergers and acquisitions, has closed two transactions since its five founders quit Egyptian investment bank Beltone Financial in mid-2009 and started up their operation in October.

It is working on six M&A mandates and is negotiating another seven to 10, company executives said.

"We are optimistic about 2010. We think the economy came out pretty well from the financial crisis," said Tarek Abdel Rahman, one of Akanar's five founding managing directors.

Egypt's economy has proved resilient despite the world downturn. The government forecasts growth in the financial year starting July 1 of 5.5 percent after an expected 5 percent in 2009/10, in line with independent forecasts.

The Egyptian M&A market started slowly with a privatization program in the mid-1990s, then gained momentum with further liberalizing economic reforms introduced since 2004.

Abdel Rahman saw the pace picking up as private equity funds and investors consolidate Egypt's fragmented industry.

Generation one

"We haven't seen local firms being consolidated," he said. "Most family firms are generation one or two. The management is the same as the owners. But with the new generation, this will begin to die away.

"We found what was missing was the mid-market mergers and acquisitions. The big firms were only covering the big deals," Abdel Rahman added.

Another managing director, Sherif El-Helw, said there was space for new players, adding: "We view the market as grossly under-represented. We give importance to being independent."

Alongside Beltone, another main rival is Egypt's biggest investment bank EFG-Hermes.

Abdel Rahman said that, as a small firm, Akanar had lower overheads and could afford to take on smaller deals. "Beltone is big. It needs big mandates to cover its overhead," he said.

Akanar closed its first transaction in November, when German fragrance and flavoring maker Symrise acquired Cairo-based Futura Labs Group.

Its second deal was in December, when Egyptian private equity firm Citadel Capital sold a 6 percent stake in ASEC Holding for $55 million. Akanar acted on behalf of Citadel.

"Putting together mergers and acquisitions in Egypt is not complicated from a structural point of view. The difficulty is getting the deals closed. Here it is much more hands-on," Abdel Rahman said, adding that sellers in Egypt were often less well prepared ahead of a deal than in more developed markets.

"Lots of work has to be done before the transaction. A lot of stuff comes out of due diligence that has to be corrected," Abdel Rahman added.

The pre-launch work to prepare a seller for talking to potential buyers could take up to a year, El-Helw said.