Private Equity Firms Turn to Africa

by: Masahudu Ankiilu Kunateh

Private equity funds are expected to play an increasing role in investments flows into Africa in the next 12 months as they seek new growth opportunities outside the depressed markets of developed countries, according to Standard Bank’s Brian Marshall, Director: Diversified Lending and Leverage.

He observed that an increasing number of private equity firms are raising capital to invest in sub-Saharan Africa investment strategies and scouting for deal opportunities, revealing that Standard Bank has been receiving a number of enquiries from several private equity firms seeking partnerships with financial institutions with sub-Saharan Africa presence.

The bank has recently been involved in some of the biggest deals involving private equity firms. Earlier this month it acted as debt co-ordinator and lender in the Actis-led acquisition of vehicle tracking company Tracker. Standard Bank also acted as co-debt underwriter in the Brait restructure and acquisition of stakes in Pepkor and Premier.

Other notable recent private equity deals involving Standard Bank include the acquisition of a stake in IHS (Nigeria) by a consortium of private equity investors and tower portfolios in Ghana and Tanzania by Helios Towers.

Although funds available to invest in Africa are still relatively small when compared to global funds and other emerging markets, an increase will be good for Africa as it will provide local firms with much needed capital.

According to EMPEA, an industry body, funds raised for sub-Saharan Private Equity strategies totalled US1, 499 million in 2010 up 55% from the US964m raised in 2009. The EMPEA study shows that Emerging Markets and sub-Saharan Africa in particular, are claiming an increasing share of private equity funding raised globally.

Mr. Marshall cited global private equity firm Carlyle’s announcement earlier this year of the launch of its sub Saharan Africa Fund and the recent acquisition by CVC of a controlling stake in Virgin Active as an indication of the interest by large international private equity funds in the region.

Carlyle, which has about $17-billion worth of assets under its management in emerging markets, more than $106bln globally, and who is actively looking for assets in Africa, said the sub Saharan Fund will be managed from Johannesburg and Lagos. The group has established a team to conduct buyout and growth capital investments in Sub-Saharan Africa.

Furthermore Helios Investment Partners, a leading Pan African fund, recently announced the closing of their 2nd successful fund which raised a total of US 900 million in commitments from investors.

“Opportunities in emerging markets in general and sub-Saharan Africa in particular are expected to fuel pipeline of deal activity in the next 12 months.

“We are already seeing through our presence in Africa a flurry of activity on the continent from private equity firms which are increasingly showing an interest to invest in sub-Saharan African assets. Africa has turned into the place to be for many investors seeking growth markets,” Mr. Marshall stated.