Africa private equity exits continue upward trend
Johannesburg, 5 March 2017
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- Exits by PE firms in Africa hit an all-time high of 48 exits (compared to 44 in 2015)
- The largest number of exits are still in South Africa, with 44% of total exits in Africa
- A significant uptick in exits to PE and other financial buyers occurred in 2016
Africa has continued its upward trend in the number of Private Equity (PE) exits, according to the EY and African Private Equity and Venture Capital Association’s (AVCA’s) fifth annual survey, How private equity investors create value. The survey found that PE houses exited a record 48 companies in 2016, up from 44 in 2015. Both 2016 and 2015 represent the highest number of PE exits in Africa over the last 10 years, with the lowest being 21 in 2009.
The bulk of PE exits (44%) in 2016 were concentrated in South Africa, followed by West Africa and North Africa, both representing 25%.
Other records include an increase in the number of PE houses exiting businesses in Africa at 31, from 30 in 2015. Over the last 10 years, the top five countries - South Africa, Nigeria, Egypt, Kenya and Ghana - accounted for 70% of PE exits.
Graham Stokoe, Africa Private Equity Leader at EY says: “A significant uptick occurred in the number of exits to other PE houses and financial buyers, which represented 17 of the exits compared to a previous high of 7 exits to PE houses and financial buyers in any previous year. Drilling down further, we note that 47% of exits to PE and financial buyers were to multinational PE houses or financial buyers, being those PE houses or financial buyers that also operate and invest in companies outside of Africa. This confirms a maturing and more competitive PE industry.”
Stokoe further adds: “This confirms that multinational PE houses view PE-owned companies as attractive investment opportunities. It is also positive to see capital continuing to flow into Africa despite economic headwinds in some of the key African markets.”
Looking forward
African PE firms see fintech, consumer products and services, healthcare, education and energy as some of the most interesting sectors to invest in.
Based on AVCA’s member outreach, PE houses expect exit activity to continue to increase and they also expect an increase in auction processes. Michelle Kathryn Essomé, Chief Executive Officer at AVCA, added: “Our annual PE exit study, now in its fifth year, continues to demonstrate the resilience of the African private equity industry, despite changing macro-economic dynamics. The findings show that key sectors such as financial services, consumer goods, and industrials continue to attract investment due to growing consumer demand. Our outlook for PE deal activity in 2017 remains positive.”
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Notes to Editors
About EY
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About African Private Equity and Venture Capital Association
The African Private Equity and Venture Capital Association is the pan-African industry body which promotes and enables private investment in Africa. AVCA plays an important role as a champion and effective change agent for the industry — educating, equipping and connecting members and stakeholders with independent industry research, best practice training programmes and exceptional networking opportunities.
With a global and growing member base, AVCA members span private equity and venture capital firms, institutional investors, foundations and endowments, pension funds, international development finance institutions, professional service firms, academia, and other associations.
This diverse membership is united by a common purpose: to be part of the Africa growth story.
About the study
The 2017 How private equity investors create value study is presented by EY and African Private Equity and Venture Capital Association (AVCA). The study examines Private Equity (PE) exits from 2007 to 2016 using data drawn from both public sources and confidential, detailed interviews with former PE owners of exited businesses for exits to 2015. For 2016, our analysis is limited to publicly available information.
The study now draws from a population of 350 exits occurring in Africa over the study period. The exits had a minimum entry enterprise value of US$1m and included only full (not partial) exits. Our analysis entails an examination of the decision to invest, value creation during PE ownership, exit strategies and key lessons learned during the process. Our aim is to produce an analysis that can help enhance the understanding of exit modalities and strategies in African markets and the underlying drivers of value creation.