BIL­LIONS READY FOR PRIVATE EQ­UITY DEALS

Finweek English Edition - - Creating wealth -

THE JSE SHOULD ex­pect more private eq­uity deals, judg­ing by fig­ures re­leased in New York. One ma­jor player – Cit­i­group – has al­ready an­nounced that it has ear­marked US$ 200m ( R1,45bn) es­pe­cially for Africa. It’s ex­pected that the bulk of that money will find its way to SA.

Emerg­ing mar­kets re­ally came into their own for the first time last year in terms of takeovers and other private eq­uity trans­ac­tions. That was seen in SA with, for ex­am­ple, Ed­con, which is be­ing tar­geted by for­eign in­vestors. Al­though by far the ma­jor­ity of the trans­ac­tions take place in Europe and the US, more than $ 22bn ( around R160bn) was in­vested in Asia, Latin Amer­ica and, to a lesser ex­tent, in Africa.

Fig­ures re­leased by the Emerg­ing Mar­kets Private Eq­uity As­so­ci­a­tion show that this rep­re­sents an in­crease of nearly 550% in four years. That an­other large in­crease can be ex­pected this year is shown by a sur­vey among ma­jor play­ers: more than 60% have al­ready de­cided to in­crease in­vest­ment in the emerg­ing world be­cause such good re­turns can be earned. US re­search group Cam­bridge As­so­ciates re­ports that the emerg­ing mar­kets last year showed an av­er­age re­turn of 25%, as against around 9% in the US.

But there’s an­other phe­nom­e­non that should gain mo­men­tum this year; com­pa­nies in sev­eral emerg­ing coun­tries are so suc­cess­ful that they them­selves are en­ter­ing the in­ter­na­tional mar­ket. Es­pe­cially in the case of the big guns, such as China and Brazil, there are large sums of cap­i­tal in search of a prof­itable home. And SA – with its well- de­vel­oped fi­nan­cial mar­kets – is also seen as po­ten­tially a se­ri­ous player.

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