Early 2019, one of the oldest insurance companies in Rwanda, SORAS Group, was merged with Sanlam, a South African insurance company.

Sanlam entered the Rwandan market by acquiring 63 per cent stake in SORAS Group in 2014. It was followed by the acquisition of the remaining 37 per cent in 2017, making SORAS wholly-owned by the Sanlam Group.

In 2018, Sanlam acquired 100 per cent of Saham Finance resulting in the Group having two businesses in Rwanda necessitating the merger of SORAS and Saham in Rwanda.

The merged entity was rebranded to Sanlam later that year. 

Merging is a transaction in which the ownership of companies or other business organizations are consolidated to one entity. Merging can also include a process where a company or business obtain or buy another entity, which is referred to as an ‘acquisition’.

A way to get bigger and expand

Getting bigger is basically one of the reasons for companies to merge. From the Sanlam-SORAS example, the new entity was immediately put on the lead as they controlled over 40 per cent of the insurance market in the country.

According to Sanlam, the merger gave them a combined asset base of about Rwf37 billion for non-life insurance and a total of Rwf32 billion net asset for life insurance, a significant potential to provide value for their clients.

 "In business you want to be better every day. You want to put together all means and resources to be successful. This will give us ability to deliver better business and operational efficiencies that will enable us better serve our customers,” Fiacre Birasa, Chief Executive Officer of Sanlam, explains the reason for the merger at the time. 

The get-bigger scenario reoccurred when Banque Populaire du Rwanda, popularly known as ‘BPR’, and BRD Commercial Bank were merged and obtained by Atlas Mara, a sub-Saharan financial services group, in 2015.

 The new entity became the second largest bank with assets worth $325 million, and the largest financial services provider in terms of branches across the country.

Minimising competition threat

Merging usually occurs between firms who operate in the same space, often as competitors offering comparable goods or service. It is referred to as horizontal merger.

Minimizing competition by merging businesses enables them to work together towards their goals and growth.

For the Sanlam-SORAS example, both companies were seeking to become Pan-African. Sanlam had a presence in Southern and Eastern Africa, Saham Finances had a presence in Northern Africa, Western Africa and operations in the Central African region and SORAS had a presence in Rwanda.

"They met somewhere. Since Sanlam had a vision of becoming Pan-African, there was a lot of sense for the company to complete its strategic move by acquiring Saham Finances,” Fiacre Birasa said.

There are different types of mergers where companies are either taken over or obtained.