African PE investment bounces back in 2016

Private equity investment into Africa increased in 2016 following a muted year of dealmaking in 2015, according to the latest data from the African Private Equity and Venture Capital Association, sister publication Private Equity International reported.

A total of 145 deals worth a combined $3.8 billion were announced last year. This compares to a total deal value of $2.5 billion in 2015, down from a peak of $8.1 billion in 2014.

“As the effects of rapid urbanisation, a resilient and adapting middle class and accelerating consumption patterns begin to take shape, increasing investor interest will continue to boost deal flow and intensify capital injections,” Cyril Odu, chief executive officer at African Capital Alliance (ACA), said in a statement.

ACA was one of the continent’s private equity firms to close a fund in 2016, raising $570 million for its fourth West Africa-focused fund, Capital Alliance Private Equity IV, against a target of $600 million.

Following the fund close, ACA became the first West Africa-focused fund manager to raise more than $1 billion in aggregate capital commitments, as reported by PEI.

Other funds contributing to the overall $2.3 billion raised for the continent in 2016 were Investec Africa Private Equity Fund II, which closed on $295 million, and Verod Capital Growth Fund II, which raised $115 million.

The fundraising total for the year was just over half the $4.3 billion raised in 2015, according to AVCA data.

The Carlyle Group agreed two deals in the region in 2016 using capital from its dedicated Sub-Saharan Africa Fund, which closed significantly above its $500 million target on $698 million in April 2014.

In September the firm agreed to acquire a majority stake in Amrod, a South African supplier of promotional products and clothing. Two months later it agreed to acquire a majority stake in CMC Networks, a pan-African connectivity provider for global telecoms companies, from fellow private equity house Investec Private Equity.

“Africa’s PE potential is coming to fruition as illustrated here through another year of strong results,” Enitan Obasanjo-Adeleye, director and head of research at AVCA, said in the statement.

“This is no flash in the pan; we now have seen strong and sustained PE investment in Africa over the past 10 years.”