Last week in brief… Small and midcap deals were the name of the game in Africa's private capital markets last week. There were a few of them. In terms of size, Phatisa's deal to expand its stake in Kanu Equipment was the largest...at just $31 million. In buying Torre Industries' 55% stake in with Kanthu Nkama Capital, Phatisa's $246 million African Agriculture Fund will increase its stake in the company to 88.8%.
In a secondary deal, LeapFrog Investments is spending $22 million to acquire a majority stake in Goodlife Pharmacy, giving East Africa-focused private equity firm Catalyst Principal Partners a full exit from the firm which it first backed in 2014. Already East Africa’s largest pharmaceutical chain, Goodlife plans to use LeapFrog’s investment to expand its network of stores further to number over one hundred in the next five years.
Kupanda Holdings, a joint venture between private equity firms Kupanda Capital and TPG Growth, is investing $2 million in a Series A round for Copernicus, a Washington, DC-headquartered geospatial-analytics business focused on Africa.
Clients use Copernicus’ platform to access data on customizable geographic areas on the continent to help improve their investment and project-related decision making processes. According to the firm’s website, clients have access to data on 98% of the continent, including almost 170 distinct cities. The capital will be used to support the firm’s growth as it expands its machine-learning and forecasting capabilities.
In venture capital deal news, Cape Town-based HAVAIC has led the first round of funding for delvv.io, a crowdsourcing startup that provides advertising agencies and brands with feedback on their marketing campaigns. The capital will be used to help the year-old company develop its business in South Africa and abroad. In its first year of operation, the company signed 25 brand clients in South Africa, North American and Asia, growing its revenues by 150% and increasing its headcount to seven.
Ethos Private Equity, one of Africa’s largest fund managers, has held the first close for its Mid Market Fund I at R675 million or approximately $48 million. Ethos Capital, the fund manager’s listed special vehicle which debuted on the Johannesburg Stock Exchange in August this year, is anchoring the fund with a commitment of R550 million initially, a figure which is expected to rise to R900 million by the final close.
As its name suggests, Mid Market I will look for midcap leveraged buyout opportunities in South Africa where it can deploy between R100 million and R350 million of equity in companies valued between R500 million and R1.5 billion. The fund manager will source investments in family-owned and/or entrepreneurial businesses, corporate spin-offs and optimization opportunities which have room for significant growth.
Averroès Finance III, a private equity fund-of-funds managed by Bpifrance and co-sponsored by Proparco held a €75 million interim close earlier this month following the addition of two new investors, Fransabank and Bank Audi, who committed €10 million and €5 million respectively to the Africa-focused fund. The fund will invest in generalist funds targeting high-growth SMEs and mid-cap companies on the continent.
Averroès Finance III has made three investments so far, most recently committing €15 million to Adenia IV which held a first close at €180 million in the last few weeks. Other commitments have been made to AfricInvest III, a mid-cap growth equity fund targeting €200 million and Metier International Capital Growth II, one of a pair of capital growth funds managed by the South Africa private equity firm which held an interim close in June this year.
On the legislative front, a draft Bill proposes to raise the limit on capital the UK Government can provide CDC Group, its development finance institution, from £1.5 billion to £6 billion. The original Commonwealth Development Corporation Act of 1999 set the original £1.5 billion limit the UK Government could invest in CDC, which, after 17 years has now been reached. While the Bill raises the limit, it is not an approval or a commitment by the Government to provide CDC with the funds within any set time frame.
A look at the figures from SAVCA’s 2016 Private Equity Industry Performance Survey shows the industry’s role in closing the continent’s infrastructure gap. The survey finds that about 14.5% of the R165.3 billion in assets under management in Southern Africa Private Equity in 2015 are from funds with a dedicated infrastructure mandate, a marked improvement on the 7.6% allocated from the year before. Private equity investment in infrastructure has been an emerging theme over the past decade, and it’s a trend that looks set to continue.
Allan Cunningham is a senior media executive who has spent the last 15 years of his career working for some of the world’s most respected M&A and Private Equity media companies including Dow Jones’s publications Private Equity Analyst and VentureWire and most recently, The Deal. He has built a number of successful digital and event content businesses, both subscription and sponsor-supported, delivering information and content-marketing services to clients in the M&A and broader deal ecosystem. He recently struck out on his own and launched Rowayton Press, a multi-platform media company focused on the private capital opportunities in emerging and frontier markets. Mr. Cunningham holds a Bachelors degree from Liverpool John Moores University in the UK.