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KPMG and EAVCA Private Equity Survey – 2007 to 2014

The 2015 KPMG Kenya (‘KPMG’) and the East Africa Private Equity and Venture Capital Association (‘EAVCA’) Private Equity Industry Survey is the inaugural collaboration between KPMG and EAVCA. Recognised as one of the first of its type in the East Africa region, it gives the financial investing community, more fondly referred to as ‘Private Equity’, a greater understanding of the sector and its trends in the East African region.

The East African Private Equity Survey takes an in depth look at venture capital, fundraising, Investment activity, exit environment and the investment professional environment within this industry covering 2007 to 2014. Belo are some of the key findings of the report:

Fund raising

  • It is estimated that of the total PE funds raised globally (USD 3.7 trillion) between 2007 to 2014, approximately 0.6% (USD 22 billion) is earmarked for Africa and 0.04% for East Africa. This equates to approximately USD 1.6 billion raised through 28 fund raisings for East Africa over a period of 2007 to 2014.
  • The main sources of these funds are investors from Europe and North America largely comprising DFIs and high net worth individuals/family offices. The majority of these funds are injected into target businesses either through limited partnerships and/or direct investment arms of the GP’s and LP’s for growth and expansion through equity deals. Approximately 80% of the respondents have indicated a preference for return of funds to investors upon the end of fund life.

Investment activity

  • PE backed deals in East Africa over the period 2007 to 2014 have been reported at 79 with a value of approximately USD 822 million. Whilst, the average ticket size based on this data is USD 10 million,the average annual deal value has been increasing from USD 9.5 million in 2007 to USD 87 million in 2014. In fact, around three quarters of the total estimated deal value has been deployed over a 4 year period to 2014. The increase in ticket sizes and deals in the recent past indicates the underlying growth of targets and an increasing appetite for larger investments in East Africa. Two sectors –FS and FMCG –dominant larger deal sizes since these sectors are showing a faster maturity and are driven by the raising middle income levels.
  • It will come as no surprise, that East Africa’s ‘big brother’ Kenya dominates PE deal activity by taking the lion’s share of 63%. Whilst, Tanzania is reported to have had 12 deals, the largest country by population, Ethiopia is only reported to have had a mere 6 deals.
  • Investment in five sectors –agriculture (27%), FS (14%), FMCG (11%), ICT (10%) and healthcare (9%) –accounted for 71% of total 79 reported deals. The agriculture sector represents its secondary sector as opposed to the primary sector, i.e. diary processing, horticulture, etc.
  • Of the total reported 79 deals, 70 are within a ticket range of USD 10 million or less and 61 were for a minority equity stake of 40% and below.
  • Larger ticket sizes and higher equity stakes were noted to be across fewer sectors. 44% of total deals in the USD10 million to USD50 million category was for an equity stake of over 30% across five sectors –FS, FMCG, agriculture, manufacturing and renewable energy. However, for deals with equity stakes greater than 51%, FS, FMCG, retail, transport & logistics and education sectors were dominant. EA PE Deals

Exits and performance

  • The total number of reported exits over the seven year period to 2014 were 21 at a value of USD 260 million. The most common exit method is share buyback at 52% of total exits, but only 3 exits had a multiple of more than 3. However, the number of exits have been increasing since 2011 with 7 reported in 2014.
  • FS services investment seem to be the most marketable for the PE sector, with 43% of total exits being in this sector.
  • Exits since 2012, appear to have been invested in before 2007, implying a holding period of more than 5 years.

Investment professionals

  • 16 of the respondents have local offices, of these around 50% have between 1 to 5 professionals working from the ground. Moreover, of the total 117 professionals reported to be working for the respondents an impressive third are females.

Please download the complete version of the survey here: KPMG and EAVCA Private Equity Survey – 2007 to 2014

David Okwara

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