Private equity exits in Africa reach record

AFRICAN private equity firms cashed in on investments last year at the highest rate in almost a decade, with South Africa, Egypt, Nigeria and Kenya accounting for twothirds of these exits.

Equity firms sold investments in 44 companies in 2015, compared with 39 companies in the two previous years, according to a report by Ernst & Young (EY) and the African Private Equity and Venture Capital Association (AVCA).

The number of successful private equity exits influences a company’s ability to attract investors and raise funds.

Private equity firms in Africa still continue to outperform public markets, the report showed. The financial services sector capped the highest exits at 24 percent between 2014 and 2015, while the oil and gas sector saw no exits during the same period. One such institution is Nigeria’s Access Bank, which obtained approval to raise up to 100 billion naira (R7bn) from either private or public funders yesterday.

“The biggest current challenges noted by private equity firms included an increasingly tough macroeconomic environment, particularly currency fluctuations, valuations trending upwards and an intermediary landscape that is underdeveloped in a number of countries,” EY said.

Returns per region varied, with east Africa performing the best, closely followed by southern Africa (excluding South Africa) and sorth Africa, the report noted.

Geographic expansion, cost reduction, mergers and acquisitions, and new management were some of the factors contributing to the growth.

AVCA analysts were still cautious about the growth of the market, saying that the year ahead would still be challenging.

The financial services sector capped the highest exits at 24% between 2014 and 2015.