How do private equity investors
create value in South Africa?
A joint study of private equity exits in Africa by EY and AVCA
Presentation at SAVCA/FT/EMPEA Conference | 11 February 2014
About the study
►
Annual study of African exits in
partnership with AVCA, now in its 2nd
year
►
Looks at how PE firms create value in
portfolio companies in Africa that have
now been fully exited
►
EY has done similar studies in Europe,
North America, Australasia and Latin
America
South Africa:
►
Identified 85 exits from 2007-2013
across South Africa
►
Interviewed 13 PE firms on 41 exits in
South Africa
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Special thanks to SAVCA
members who have given
their time and energy to
provide information for this
Study.
Exit activity in South Africa
Exit route, by exit year, exit
population in South Africa
Number of PE exits in South
Africa, 2007–13
2013
20%
40%
40%
2012
33%
25%
42%
2011
17%
8%
8%
67%
2010
7%
14%
29%
50%
2009
25%
75%
17
16
2008
18%
18%
14
55%
12
2007
7%
14%
14%
13
64%
8
Creditors/banks
Government/DFIs
IPO
PE
Private
Stock sale on public market
Trade
4
2007
Source: How do private equity investors create value?: 2014 Africa Study, EY and AVCA, 2014. Based on preliminary data.
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2008
2009
2010
2011
2012
2013
Exit activity in South Africa – by sector
Industrial goods is the most active sector for exits
Food & beverage
5%
19%
Industrial goods
Retail
5%
16%
Technology
Automobiles &
Parts
2%
12%
Construction &
materials
Mining and
metals
2%
11%
Business
services
Media
1%
7%
Financial
services
Personal &
household
1%
6%
Healthcare
Travel & leisure
1%
6%
Telecom
Utilities /
Oil & Gas
1%
5%
Agriculture /
Forestry
Source: How do private equity investors create value?: 2014 Africa Study, EY and AVCA, 2014. Based on preliminary data.
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Exit activity in South Africa – by size
Number of exits in South Africa, by entry EV (US $m)
>75
22%
1-10
48%
30-75
15%
10-30
15%
Source: How do private equity investors create value?: 2014 Africa Study, EY and AVCA, 2014. Based on preliminary data.
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5 key findings
1.5x
53%
82%
1.5x relative to
market return
53% had access to
PE firm’s network
82% had
governance
changes
Source: How do private equity investors create value?: 2014 Africa Study, EY and AVCA, 2014. Based on preliminary data.
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85%
56%
85% deals where 56% sold to trade
incumbent
buyers
management teams
backed
Exit enablers
Leverage networks and relationships – most exits are proprietary and exclusive
1.
“The exit came via referral from intermediaries who said there was some interest from a strategic. It
had to be the right price to get the sponsor to exit”
2.
Start exit preparation early
“Two years prior to sale, we re-positioned and re-branded the company, and built the momentum
carefully”
3.
Ensure continuity of management teams or clear succession planning – it gives buyers
confidence
“The management team typically have golden handcuffs for 3 years after we exit”
4.
Take advice on currency exposure/ risks
“How a deal is structured is key. With currency fluctuations and other external events, a pure vanilla
equity exposure can be risky"
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