16 March 2015

Lessons learned from a “first-of-its-kind” privatisation in Rwanda

This article was written by Andrew Wingfield (Partner), James Darbyshire (Counsel) and Michaela Moore (Associate).

With sub-Saharan Africa’s real GDP expected to grow annually by more than 5% until 2018[1] and Rwanda being viewed as an appealing arena for foreign investment, it was this growth story that paved the way for our client’s strategy to develop Rwanda as a commercial banking hub in Africa by undertaking the first commercial banking sector privatisation in that country to date.  

King & Wood Mallesons’ London office recently acted for a significant UK-listed client in a complex and “first-of-its kind” carve-out and acquisition of a Government owned commercial banking operation based in Rwanda. The team was thrilled to see its legal expertise and innovation being recognised by being short-listed for a British Legal Award for M&A deal of the year.

Due to the fact that a privatisation of this kind was unique in the Rwandan market and involved a complex carve-out arrangement from a long-established Government-run development banking institution, the team was interested to observe how various political influences and priorities came to bear in the negotiating process and beyond.

While the Government shareholders were each exiting entirely from the venture (and as such, we would usually expect an exiting shareholder to have limited concern for the venture post-completion), there were nonetheless a political desire to ensure that the new owners of the business would operate it in an efficient and proper manner. Such was this concern, that certain post-completion protections were agreed that would be triggered by certain buyer default events occurring after the sale date.

The involvement of several Government parties and departments also meant that negotiating was sometimes multi-pronged - and that it was common for points that were understood to have been agreed to be re-opened for renegotiation as new levels of government and individuals were introduced into the process.  

The involvement of multiple levels of government did, however, lead to a collaborative approach between the parties. We often found that the King & Wood Mallesons team would take a leading role in explaining through the various transaction structures and business separation issues based on our previous experiences, and Rwandan advisers on both sides and the target’s company secretary would also be working closely together to make the various regulatory notifications required to be made in connection with the transaction. This collaborative process also extended to our client’s making of a COMESA competition filing in connection with the transaction to complete the transaction.

On a practical level, the transaction was run on an extremely tight timeframe (signed within one month from winning the initial tender) and divergent expectations of the parties on timing was often an issue. Similarly, completion was undertaken in Rwanda with the King & Wood Mallesons team in London during that time (although the King & Wood Mallesons team was on the ground in Rwanda for a significant time during negotiation of the transaction), which increased our reliance on email correspondence and conference calls, in which technological problems often significantly frustrated the process.

Despite these challenges, the King & Wood Mallesons team and client were thrilled to get the transaction over the line and gain some fascinating insights into the practicalities of doing business in Rwanda along the way.

[1] IMF World Economic Outlook 2013

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