Specialist investment firm Apis Partners looks to gain Nigerian and sub-Saharan exposure with deals

Apis Partners, a private equity (P.E) fund manager which raised $157 million in commitments for its Apis Growth Fund I at its first close in August 2015 targets financial services firms in Africa and South Asia.  It is understood that Apis partners is considering several acquisitions in Africa.

Business Day has talked with Apis Partners, the financial services focused P.E. fund manager and understands that the firm is already believed to be in talks to acquire a stake in a Nigerian based micro finance bank with a state licence, which is also close to securing a national license.

Apis’ investors include developmental financial institutions such as the UK’s CDC, FMO, EIB and Swedfund and the banking groups Old Mutual and Intesa Sanpaolo.

The Apis team members are financial services experts and there is strong appetite for investments in financial services that advance financial inclusion in its target geographies. “We have just secured approval for two deals, one that operates in Africa and China and the other in India,” said Rotimi Oyekanmi, partner at Apis.

“We are keen to gain exposure to the Nigerian market. One of the investments that we are working on will also enable us to operate in Francophone West Africa,” Oyekanmi said.  It is understood that the deal size is likely to be in the range of US$20 – US$40 million, given the fund target size of US$250 – US$300 million, of which the majority is to be deployed in sub-Saharan Africa.

Apis is working on several transactions within this deal target size range, with a number of these focused on the Nigerian and sub Saharan markets, according to Oyekanmi.  This further confirms a high level of interest in financial services from P.E. and the funds and institutions whose money they manage, as well as Nigeria’s role in leading that investment front.

Led by Nigeria, West Africa’s share of Africa P.E transactions grew to 25 per cent between 2011 and 2014, according to data from the African Private Equity and Venture Capital Association (AVCA).

“Supported by local and foreign institutional investors, African private equity firms are increasingly able to mobilise much-needed capital to invest in a diverse range of companies, countries and sectors across the vast African continent,” Dorothy Kelso, Director of Research at AVCA said in a recent report.

The main sectors attracting P.E investments in Nigeria continue to be Fast Moving Consumer Goods (“FMCG”), Financials and Industrials, which have accounted for around 60 per cent of Africa private equity transactions by volume from 2007-2014.

Apis Growth Fund I will focus on payments, financial infrastructure, savings and investments, credit, insurance and capital markets.  “A gross dollar denominated return of 25 per cent is targeted over the life of the fund (10 years) by delivering both financial and intellectual capital to grow companies,” said Oyekanmi in a recent presentation on the firm’s outlook.

Capital for private equity is often raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.  Investors are attracted to growth markets like Nigeria because of the favourable demographics and above average GDP growth rates.

The advent of new and cheaper technologies, such as mobile banking solutions, is also helping individuals in historically unbanked regions gain financial access.  The business models of companies that Apis Partners expects to invest in include payment services, switching, agency banking, mobile money, identification and analytics and pre-paid debit card solutions.  Global fintech investment more than tripled to $2.97 billion in 2013 from $928 million in 2008, according to a report published in March by consulting firm Accenture.

Matteo Stefanel, formerly a partner in emerging markets P.E firm Abraaj, set up Apis Partners with Udayan Goyal, a founder of fintech investment and advisory firm Anthemis Group.  Matteo said in a recent interview that much of the innovation in financial services was coming from Africa and South Asia, with Nigeria expected to be one of the countries at the forefront of this.  “We are talking about 2.2 billion out of the 2.5 billion unbanked people who are in our reference markets. That means a 2.2 billion people market that is untapped,” Matteo said.