Guidelines (“Threshold Guidelines”) to fast track the approvals in certain instances.<sup>73</sup> Generally, merging parties may request the CAK for an exclusion if the combined turnover of the acquirer and target is below KES 1 billion (~USD 10 million). This exclusion is normally granted within 2 weeks and does not attract filing fees.<sup>74</sup> In addition, the GoK has used different thresholds to attract PE Funds to markets like health care and carbon-based mineral sectors.<sup>75</sup> According to CAK’s annual report for the 2014-2015 financial year,<sup>76</sup> 71 out of 148 notified M&A transactions were excluded from the provisions of the Competition Act, saving the applicants significant time and resources in the process. Offsetting the advantages of this simplified process, however, is that the Competition Act does not clearly define the term “turnover,”<sup>77</sup> which is key to determining thresholds as well as fees and disclosure requirements: the larger the turnover, the more the filing fees and the more the information required when seeking CAK approval. The 2016 amendments of the Competition Act allows setting a formal threshold for mandatory notification, but the rules for setting threshold value and defining elements to calculate “turnover” are yet to be approved.

In addition to the broad mandate defined by the competition law, if the regulator is (partially) required to cover its operational expenses through filing fees, this may incentivize broadened scope for reviews and higher fees, both of which can be burdensome to the PEVC industry. For example, while the CAK receives approximately 70-80 percent of its funding from the National Treasury, the remainder of its budget is covered by filing fees. The CAK has reviewed a growing number of transactions over the last several years -- 88 in the year ending June 30, 2014 (of which 4 transactions were PEVC related), increasing to 151 in the year ending June 30, 2016 (of which 10 were PEVC related).<sup>78</sup> Out of the 151 transactions in 2016, only 39 had a combined turnover of KES 1 billion (USD 10 million). Similarly, since becoming operational in 2013, COMESA’s CCC uses its revenues to cover operational expenses. Given this pressure to generate revenue, the CCC initially charged a filing fee of 0.5 percent of the merging parties’ combined annual turnover or assets (whichever is the higher), capped at USD 500,000. This high cost was revised downward in 2015 (concurrent with changes in the financial thresholds) to 0.1 percent, capped at USD 200,000. Competition authorities around the world charge fees for merger review to cover the administrative costs of undertaking a compliance check to ensure transactions do not harm competition, but these fees have to be proportionate to avoid discouraging efficient market development.

However, promising changes are underway. CAK recognizes the importance of the PEVC industry to attract capital to Kenya; and given the increasing number of PEVC transactions, as well as the time-sensitive nature of such transactions, interviews with CAK suggest they are developing simpler rules for PE investors. The CAK has indicated that, as part of its policies, it has determined that PE funds do not typically present concerns with respect to competition in an industry. Given PE funds’ a priori bias against

> 73 While not legally binding, the Threshold Guidelines provide guidance to parties as to the circumstances under which a merger may be considered for exclusion and when a full merger notification is required.

> 74 See Merger Threshold Guidelines, paragraph 4(a).

> 75 In the health care sector, the thresholds for exclusion are between KES 50 million (approximately USD 500,000) and KES 500 million (approximately USD 5,000,000) while in the carbon-based mineral sector, the transaction may be excluded from notification if the value of the reserves, the rights and the associated exploration assets to be held as a result of the merger is below KES 4 billion shillings (approximately USD 4 million).

> 76 Competition Authority of Kenya, Annual Report and Financial Statements 2014/2015.

> 77 Turnover is defined in The Exclusion of Proposed Mergers from provisions of Part IV of the Competition Act as “includes the value of the annual sales turnover for the merging parties within Kenya, based on the audited accounts of the holding company, the subsidiaries and other related companies for the preceding year”.

> 78 Competition Authority of Kenya, Annual Report and Financial Statements 2014/2015/2016.  Since June 30, 2016,

> 4 additional PE transactions were placed under consideration since 6/30/2016.

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