While the South African private equity market is relatively mature, east and west African markets are catching up fast. This is according to Bowman Gilfillan’s Head of Private Equity, John Bellew. He said that, in particular, Kenya, Nigeria and Ghana were seeing an increase in private equity deals in their countries, but that other countries were also benefiting from increased transaction flows.
Bellew will be moderating a panel in the SuperReturn Africa conference, to be held in Accra, Ghana, in early December. The conference is an international private equity and venture capital event, and will host around 550 attendees including some of the best fund managers in Africa, as well as LPs such as sovereign wealth funds, global funds of funds, family offices and African pension funds. The conference will cover issues around private equity in Africa, and will focus in different aspects of the transactions such as raising capital, and funding and exiting transactions in various regions. Bellew will moderate a discussion that will focus in part on successful fund managers and how deals should be sourced and executed in Africa.
Bellew says that a track record of successfully making and exiting transactions is a key factor in being able to raise ongoing capital for private equity investment in Africa.
“There are a host of new fund managers in Africa, many of whom have been exposed to African private equity and have the skills-set and experience to execute transactions successfully and profitably. Many of these new managers are attracting support from Development Finance Institutions, who have played a key role in supporting the growth of the industry.
Bellew has identified a number of sectors which fund managers are targeting.
“We are seeing a lot of capital being raised for infrastructure and real estate funds, with food funds also being a focus. Generalist funds are still targeting FMCG and financial services, as well as some retail,” he notes.
When it comes to sourcing transactions, Bellew says that general partners (GPs) prefer to source transactions from within their own networks, using specialist local knowledge. Auction processes are also becoming a more common feature of the African private equity landscape.
“Auctions tend to be viewed as somewhat less desirable than proprietary transactions as the number of bidders can drive prices up, and also result in wasted costs for unsuccessful bidders.”
Bellew says the increased availability of capital in the market is an opportunity for funds with existing portfolios to sell to other private equity houses. The large amount of capital available for larger transactions also offers an opportunity for mid-market funds to source attractive transactions that fall below the thresholds of larger players.
“There is a universe of transactions that the big firms can’t do, so I believe targeting the slightly smaller deals is a good strategy,” he says.
From a legislative perspective, Bellew notes that differing local regulations have not been a barrier to private equity investment in African countries, with managers being creative in coming up with solutions and designing instruments to minimise transaction risk.
“Investors simply work with lawyers who have the specialist local knowledge to oversee the transaction in that specific jurisdiction, they don't let differing regulations stop them,” he notes.
Bellew adds that attending an event of this nature is invaluable to all involved in the private equity space – the access to the mix of LPs and GPs attending the event, alongside local and international experts on all aspects of private equity, is critical not only to forming new business relationships but also with regards to acquiring the very latest information on trends and opportunities in private equity.
Written by John Bellew, head of Private Equity, Bowman Gilfillan