The number of exits achieved by private equity firms in Africa is trending upwards, evidenced by a record number of exits in 2016.
According to the EY and African Private Equity and Venture Capital Association’s fifth annual study, 48 exits were achieved in 2016, continuing the consistent year-on-year increase over the last 5 years. In terms of the exit route, a significant uptick in sales to PE and other financial buyers took place, indicating a maturing and more competitive African PE industry.
While the bulk of PE exits continue to be concentrated in South Africa, exits in North Africa soared to new highs in 2016 and exits in West Africa also recovered.
The number of PE firms achieving exits in 2016 increased slightly to a new high of 31, indicating that the African PE sector continues to develop despite recent economic headwinds impacting a number of African economies.
Financial services, industrials, consumer goods and services continued to attract the highest number of PE exits between 2007 and 2016. Exits from the healthcare and industrials sectors continued to increase.
Overall, the study emphasises fintech, consumer goods and services, education, healthcare and energy as some of the key sectors of interest to investors. It also sets out ten key considerations for delivering better exits and enhancing value creation. These include more rigorous portfolio reviews; more time and focus on exit planning; using an independent exit committee; timing in light of macro and other market uncertainties; and developing scale that is interesting to strategic investors.
Commenting on the study, Enitan Obasanjo-Adeleye, Director of Research at AVCA, noted: “The fifth Annual EY AVCA Exit Study once again provides crucial information for PE firms when considering exits. The PE exits record high illustrates the continued success of the industry and signals its resilience in spite of opposing macroeconomic issues facing some African countries.”
Graham Stokoe, Africa Private Equity Leader at EY, added: “Private equity investors are now creating and preserving more value in the companies they own and operate in Africa. With better preparation for exits, the PE industry in Africa is set to flourish even further over the next decade.”
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How private equity investors create value: EY & AVCA
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