Private Equity deals on the rise in EA

March 7, 2012
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Private Equity deals on the rise in EA /FILE
[/caption]p>NAIROBI, Kenya, Mar 7 – The East African region recorded the second highest number of Private Equity (PE) deals after Southern Africa according to a report released by Deloitte analysing the market for 2011.

Director of Corporate Finance Services at Deloitte East Africa Alexander van Schie said PE investments showed marked focus on SMEs in the region especially with most designated financial institutions looking to boost the capacity of local SMEs.

“The key industries that are being invested in are more related to macroeconomic factors like middle income class growth, in manufacturing, financial services and consumer business,” he said.

According to the report, the financial services sector was likely to see increased activity in PE deals with 14 percent of respondents indicating that they would focus energies on the segment in the next 12 to18 months.

Agriculture and agribusiness followed by healthcare were also sectors of interest for respondents looking to tap into the growing middle class in the region.

Kenya attracted the lion’s share of the region’s PE deals with 83 percent. However on average across the region most transactions were less than $20 million.

So far $633 million has been raised by recently launched East-Africa focused funds, spread among 53 general partners investing in the region.

Africa Assets Director Rachel Keeler says despite the relatively small investments in the region some large deals have been recently struck in the area of infrastructure.

“There were some large deals that were concluded like the Rift Valley Railways (RVR) and in early 2012 export trading group based in Tanzania,” she said.

The Citadel Capital’s RVR infrastructure investment is one of the largest PE deals in East African history with a $287 million capital expenditure programme.

Though fairly new to the East African region PE activity in this market has been going on globally since the 1970s.

Private equity firms will sometimes pool funds together to take very large public companies private and then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO.

Challenges that will need to be tackled moving forward in the PE space will involve addressing legal and regulatory hurdles, corporate governance and forming an industry body for existing funds in the country.

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