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Private equity fund deals in EA hit $930.3m

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Private equity (PE) deals in East Africa bounced back in 2018 after a seemingly tough year 2017, with 47 PE deals announced this year, up from 27 in the previous year, a report shows.

The increase in PE deals is indicative of East Africa’s growing prominence as a private capital destination, in part driven by the stability of the region’s economies.

During the year 2018, Kenya recorded the highest number of private equity investments made, with 24 transactions recorded compared to 18 in 2017. Uganda was second in terms of PE deals activity with a total of 6 deals recorded in 2018.

Ethiopia, whose profile has been steadily rising amongst the investing community recorded 5 PE transactions for the year. Rwanda had two while Tanzania had one.

“A relatively calm transition following the 2017 elections and the handshake by the leading parties’ political heads sent a strong signal on the country’s stability and reinforced investor confidence, resulting in the jump in deals done in 2018,” said Eva Warigia, Executive Director at the East Africa Private Equity and Venture Capital Association (EAVCA), the trade organization for private equity and venture capital firms operating in East Africa.

“Most of the investments had been in the pipeline during the election cycle waiting for the political tension to ease before conclusion,” Ms. Warigia added.

Private equity investment activity during the year was spread across multiple sectors from education with an investment by Fanisi Capital in Kitengela Group off Schools, to healthcare in Tanzania with Leapfrog Investments’ acquisition of stake in Pyramid Group.

2018 also saw a US$47.5 million investment in technology firm Cellulant, reinforcing East Africa’s position as a tech hub.

Ethiopia’s jump in deal activity from no deals in 2017 to 5 deals closed in 2018, was largely attributed to the growing network of country focused funds, which have dedicated funding to the growing Ethiopian market.

This year, Cepheus Growth Capital Partners, a fund dedicated to exclusively investing in Ethiopia closed its maiden fund at US$ 100million.

Zoscales Partners, another Ethiopia focused with US$ 75 million in assets under management, closed two deals in the manufacturing and consumer sectors in Ethiopia.

Disclosed deal value for 2018 deals was recorded at US $834.3 million, compared to US$ 446.78 million in 2017. Further, as East Africa’s attractiveness grows, the number of PE firms looking at investable businesses in the region also grew.

This year, Mauritius Based Adenia Partners, French Amethis Partners,South Africa’s Ethos Partners, and Washington D.C’s Capria Ventures were among the PE funds that opened their offices in the region, to tap into East Africa’s opportunities.

PE in East Africa provides growth capital for the rapidly expanding SME economy, investing in businesses with an annual turnover of less than US$ 30 million, employing less than 150 employees.

Businesses that meet this threshold are few which leads to competition for these deals, ultimately resulting in the steep company valuations.

“Going into 2019, we expect the momentum for deal activity to increase, at least for Kenya and Ethiopia,” said Ms. Warigia.

“We are optimistic that East Africa will remain a significant market for investors looking at Africa, backed by its economies’ resilience. Along with this is the diverse sectors available for investment, providing a wide spread for value generation to the investors’ portfolio.” She added

Some of the PE exits realized in 2018 were drawn from: healthcare, agribusiness, real estate and energy.

EAVCA is a business association that represents the voice of private investors in East Africa. The association was formed in 2013 by seven founding private equity funds: Abraaj Capital, Acumen Fund, AfricInvest, Centum, Catalyst Principal Partners, Fanisi Capital, and TBL Mirror Fund.

Today, EAVCA has grown to a membership of 65 entities comprising: development finance institutions, private equity and venture capital funds, and intermediary advisory firms.

The association represents approximately US $4.5billion in funds under management,looking at investments in scalable enterprises within the Eastern Africa region.

As a member association, EAVCA serves as the interlinking platform for public stakeholders, local businesses and private investors, building on dialogue and industry insights to create a sustainable, informed eco-system that advances sustainable wealth creation and economic development in the region.

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