The African Private Equity and Venture Capital Association (AVCA), the pan-African industry body which promotes and enables private investment in Africa, has released the 2020 edition of the African Private Equity report, showing insightful analysis on the industry.
Known as the Annual African Private Equity Data Tracker, the report provided insights on private equity fundraising, deals, exits, amongst others.
Here are key insights BusinessDay extracted from the report.
PE fundraising falls to 6yr low in 2020
The total value of African PE fundraising fell to the lowest in six years, no thanks to the pandemic that triggered a global lockdown and put a halt to investment activities.
The fundraising which captures value by year of final close fell 69.2 percent to $1.2 billion in 2020 from $3.9 billion in 2019, a pointer to how the COVID-19 affected PE deals in the continent.
Of the total volume of funds closed in 2020, 51 percent were growth and buyout focused funds. Venture Capital funds accounted for 40 percent of the total number of funds closed, while infrastructure funds represented 7 percent.
Similarly, 35 percent of the total value of funds raised in 2020 originated from sector-focused funds; 20 percent of the value within sector-focused funds came from infrastructure funds.
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Nearly half of the total amount closed in the period was originated from sub-Saharan Africa funds; regional funds were second representing 25 percent of the total funds raised; country-focused and pan-African funds represented the remaining 26 percent.
Notably, the $71 million raised by Tlcom Capital, as well as CardinalStone Capital Advisers ($64 million), Agooji ($100 million), and the $80 million of Goodwell Investments and Alitheia Capital were fundraised that reached final close in 2020.
Despite number of African PE deals at 6yr-high, value fell to lowest since 2016
The value of private equity deals in Africa fell to $3.3 billion in 2020, lowest in five years.
The amount was a 13.2 percent decline when compared to the $3.8 billion value in 2019, and occurred despite the number of PE deals in the continent reaching the highest in six years.
The number of African PE deals stood at 255 in 2020, up from the 230 reported the year before.
Between 2015 and 2020, the total value of African PE deals amounted to $21.7 billion. On the other hand, the total volume of the deals between 2015 and 2020 stood at 1,257.
Financial sector continues to steal the show
For the umpteenth time, the financial sector maintained top in terms of attracting the highest number of deals in the continent.
Of the total 1257 volume of PE deals reported in the period 2015 and 2020, 15 percent was from the financial sector.
This was followed by consumer discretionary, industrials, information technology, consumer staples, utilities, and health care.
Others include communication services, real estates, materials and energy.
In terms of sectors that attracted the highest value of PE deals, utilities came top, accounting for 18 percent of the total $21.7 billion amount between 2015 and 2020.
This is followed by energy, financials, communication services, industrials, materials, consumer discretionary, consumer staples, health care, information technology, and real estate.
Not a single PE firm in Africa used capital market as exit route in 2020
For the first time in six years, African PE firms avoided the capital market as an exit option.
The entire neglect of the capital market, confirms the apathy of African PE firms for using the capital market as an exit option at a time when the pandemic affected the valuations of companies.
Of the total 46 exits that occurred in 2015, only about seven percent happened via the capital market.
The number fell to four percent between 2016 and 2018; and by 2019, it fell further to two percent.
Exiting via the capital market sometimes involves going public by way of Initial Public Offering (IPO) or by way of listing by introduction, and may require more of the public having a stake in the firm no matter how small.
Meanwhile, data tracked by AVCA showed that the number of exits decreased in 2020, thus reflecting the economic crisis caused by the global pandemic.
Exits to Trade Buyers was the most common exit route in 2020 (46percent), a trend that was also witnessed last year; whereas exits to PE and other financial buyers came second, representing 33 percent of the total number of exits in 2020.
Notable companies that exited in 2020 includes Adenia Partners which exited Mauvilac; African Infrastructure Investment Managers exited from Cookhouse Wind Farm; Africinvest Group from Esprit; Actis from GHL Bank; and Helios Investment Partners from Africatel (Unitel).
West Africa tops in value of PE deals, Southern Africa leads in volume
While the West African region made up of countries like Nigeria, Ghana, Cote d’Ivoire, Senegal amongst others, led the continent in terms of the value of PE deals reported in the last six years; the Southern African region took the top spot in terms of the numbers of the deal.
West Africa recorded 313 deals, worth $5.4 billion in value. On the other hand, Southern Africa with countries like South Africa, Namibia, Mauritius and Botswana, had a total of 364 deals that is worth $4.4 billion.
This is followed by the Northern African region with a total deal of 220 worth $3.6 billion.
East Africa had 237 deals that are worth $2.8 billion.
Nigeria ahead in both number and value of PE deals in West Africa
Nigeria is still the top destination for PE deals in West Africa.
Of the total number of reported PE deals in the West African region, put at 313 between 2015 and 2020, Africa’s biggest economy accounted for 58 percent, a wide mark when compared to Ghana’s 17 percent which came second in the region.
Cote d’Ivoire came third with nine percent, followed by Senegal (5 percent), Mali (3 percent), Burkina Faso (3 percent), Togo (2 percent), and Niger and Benin (1 percent) each.
In terms of value, Nigeria still tops, accounting for 54 percent of the total $5.4 billion PE deals in the region.
This is followed also by Ghana (26 percent), Cote d’Ivoire (6 percent), Mauritania (6 percent), and Guinea (4 percent).
