Velocity Capital Group has been in talks with financiers to raise capital for its Ethiopia-focused agribusiness, Velocity Dairy, to fund its $56milion (€45million) plans to build a dairy processing plant.
.
The financing will go into the building of new infrastructure, procurement of factory machinery and the purchase new equipment. Velocity intends to produce dairy products and fruit juices to be marketed primarily in the local market.
.
The new plant will have a daily capacity of up to 70,000 liters. About €8 million of the financing is expected to come from the International Finance Corporation (IFC).
.
Velocity Dairy was set up by US-based Velocity Capital in 2010. The investor wholly owns the company through a holdco, Velocity Africa Holding BV. The company is headquartered in Driebergen-Rijsenburg , Netherlands.
source
Sunday, December 1, 2013
MBO Capital selects FrontInvest
MBO Capital has adopted FrontInvest, an electronic investment management platform developed by eFront.
FrontInvest is an automated risk management platform that enables managers to monitor fund, investor and portfolio operations.
MBO Capital has implemented the platform in the early stages its fundraising to demonstrate strong operational processes to investors.
“Managing our fund with eFront conveys to our investors and partners our commitment to transparency, effective communication, and the highest degree of trust,” said Jide Ogundare, chief executive officer at MBO Capital.
Based in Nigeria, MBO Capital is looking to raise $250 million to invest in business primarily operating in the energy, consumer, technology and financial services sectors.
source
FrontInvest is an automated risk management platform that enables managers to monitor fund, investor and portfolio operations.
MBO Capital has implemented the platform in the early stages its fundraising to demonstrate strong operational processes to investors.
“Managing our fund with eFront conveys to our investors and partners our commitment to transparency, effective communication, and the highest degree of trust,” said Jide Ogundare, chief executive officer at MBO Capital.
Based in Nigeria, MBO Capital is looking to raise $250 million to invest in business primarily operating in the energy, consumer, technology and financial services sectors.
source
Private Equity Africa to host inaugural fundraising forum in London
Private Equity Africa, the industry publication for fund managers, investors and advisors will on November 28 host an inagural fundraising forum in London.
Dubbed ‘Executing a Successful Fundraising Strategy’ will bring together: leading industry experts, investors and advisors from some of Europe and Africa’s top private equity firms, fund-of-fund managers and law firms to discuss the latest trends and best practice in: fundraising, fund marketing, due diligence and investor and media relations.
The forum is expected to take new mangers through fundraising strategy for successful investment in Africa.
Gail Mwamba, Editor of Private Equity Africa in a statement to TechMoran said: “We are delighted to be announcing our first ever conference which will provide fund managers with valuable insight into how to successfully raise an Africa fund. We are looking forward to bringing together some of the industry’s top experts to discuss the latest issues, trends and best practice.”
“Despite the opportunities that Africa offers as one of the great frontier markets, many fund managers find it difficult to raise funds for Africa, with over 200 managers looking to fundraise in excess of $5billion for Africa. The idea of the ‘Executing a Successful Fundraising Strategy’ forum was born out of the need to help first time managers map out a successful strategy.”
The conference will include a fundraising masterclass which will cover best practice in fund marketing regulations, compliance and reporting. The masterclass will be followed by a series of presentations and panel discussions led by industry specialists, analysis of LP allocation strategies and case studies from leading funds on how they have successfully raised money.
Speakers have been carefully been chosen either for their track records in establishing successful funds or for investing and advising on some of Africa’s largest funds.
Confirmed speakers include:
· James Moore, Co-Head Private Funds, UBS
· Marc Nahum, Director, Actis
· Dushy Sivanithy, Principal, Pantheon Ventures
· Laurent Demey, Managing Partner, Amethis
· Geetha Tharmaratnam, Director, Abraaj Group
· Alexander Wolf, Vice President, HarbourVest Partners
· Thomas Meyer, Director, LDS Partners
· Matthew Craig-Greene, Head of IR and Research, Pivot Partners
· Eve Ellis, Partner, Charles Russell
· Adrian Mayer, Partner, Charles Russell
· John Rowland, Managing Partner,White Lake
· Rajan Rosick, Client Services, Trident Fund Services
· Nick Lambert, Partner, Bell Pottinger
- See more at: http://techmoran.com/private-equity-africa-to-host-inaugural-fundraising-forum-in-london/#sthash.bWGE4Vr1.dpuf
Private Equity Africa To Educate Managers On Fundraising
VENTURES AFRICA – Private Equity Africa (PEA), the industry publication for fund managers, investors and advisors, today announced its inaugural fundraising forum to educate struggling managers on fundraising.
The forum ‘Executing a Successful Fundraising Strategy’ which will be held in London next week will bring together leading industry experts, investors and advisors from some of Europe and Africa’s top private equity firms, fund-of-fund managers and law firms to discuss the latest trends and best practice in: fundraising, fund marketing, due diligence and investor and media relations.
Despite the opportunities that Africa offers as one of the great frontier markets, many fund managers “find it difficult to raise funds for Africa,” with over 200 managers looking to raise funds in excess of $5 billion for Africa.
“We are delighted to be announcing our first ever conference which will provide fund managers with valuable insight into how to successfully raise an Africa fund,” Gail Mwamba, Editor of Private Equity Africa said.
The conference will include a fundraising masterclass which will cover best practice in fund marketing regulations, compliance and reporting.
The masterclass will be followed by a series of presentations and panel discussions led by industry specialists, analysis of LP allocation strategies and case studies from leading funds on how they have successfully raised money.
source
Africa brought in over $2B in closed private equity funds
Industry publication Private Equity Africa said Africa raised more than USD2 billion in closed private equity funds from January to September. The publication for fund managers and investors said this amount already exceeded full-year figures for 2012, according to Ventures Africa.
The publication said the latest figures are based on data provided by alternative assets intelligence firm Preqin. The said figures are exclusively supplied to Private Equity Africa, the report said.
This year's figures have been led by fund closures at the start of the year. Ethos closed USD800 million in funds, Private Equity Africa said. Vital Capital secured USD350 million. A debut fundraiser by Phatisa closed another USD243 million, said the report.
The said figures do not include interim closing from some of the largest funds in the industry. They only indicate final closures. Private Equity Africa research said Carlyle has already passed its original target and will reach USD700 million by the end of the year, the report stated.
The business publication's report shows that the figures do not include Development Partners International. The firm has raised over USD400 million in its first closing. Amethis also closed USD290 million during the year, Ventures Africa reported.
Gail Mwamba, the publication's Managing Editor, said: "Improved LP sentiment has also underpinned the launch of Abraaj's $800 million Africa-focused vehicle which is twice the size of its predecessor. Expectations are that 2014 will be an even more positive year, with expected final closes from groups such as Carlyle."
Private Equity Africa reports in excess of $2billion in 2013 fund closings The industry publication for fund managers, investors and advisors says Improved LP sentiment for Africa beginning to translate to solid commitments
Private Equity Africa reports in excess of $2billion in 2013 fund closings The industry publication for fund managers, investors and advisors says Improved LP sentiment for Africa beginning to translate to solid commitments
Private Equity Africa, the industry publication for fund managers, investors and advisors has today reported that Africa-focused fundraisers have brought in excess of £2 billion in reported closings for the period January – September 2013, already exceeding 2012 full-year figures.
The latest figures based on data from Preqin, the alternative assets industry’s leading source of data and intelligence, supplied exclusively to Private Equity Africa.
This year’s figures have been driven in part by strong closings reported by Ethos which announced its $800m fund closure at the beginning of 2013, Vital Capital which has brought in $350m for its maiden vehicle and Phatisa, which reported a $243 final close of its first fund. A number of other smaller funds have also reached final close.
The figures only cover final closures, and exclude interim closings from some of the industry’s largest funds, including Carlyle, which has already exceeded its original target, and will touch $700m by year-end, according to Private Equity Africa research.
Figures also do not include Development Partners International, which has exceeded $400m in its first closing, and Amethis with a $290m first close during the year.
Commenting on the figures, Adeola Dosunmu, Head of Research at Private Equity Africa, said: “This year’s fundraising figures bring great warmth to the continents fundraising environment and demonstrates that improved LP sentiment for Africa is slowly translating to solid commitments.
“Signs of this growing sentiment were shown earlier this year when the Emerging Private Equity Association (EMPEA) placed Sub-Saharan Africa in its top tier for emerging markets, displacing traditional BRIC markets.”
Gail Mwamba, Managing Editor of Private Equity Africa, said; “Improved LP sentiment has also underpinned the launch of Abraaj’s $800 million Africa-focused vehicle which is twice the size of its predecessor.
“Expectations are that 2014 will be an even more positive year, with expected final closes from groups such as Carlyle.”
The publication of the fundraising figures coincides with Private Equity Africa’s maiden fundraising forum. The first of its kind for the industry, the event aims help first time managers execute a successful fundraising strategy for Africa-focused funds.
source
Friday, January 25, 2013
Ethos Private Equity has high hopes for Africa
SUMMIT TV: Looking at private equity trends across the globe, it’s generally been a difficult period for raising investment funds. You have a new fund where you raised $800m — it’s a difficult time, so why now?
NGALAAH CHUPHI: I think it’s clear that private equity is maturing as an asset class here in South Africa, and more importantly into the rest of the continent as well. If you look globally, private equity has been around for a while, since the 1970s. From our own perspective we started back in 1984 when we were part of a bank. In 1992 we started raising money from third-party private investors, or 92 Fund or Fund 2. We have grown quite significantly since then, raising Fund 3 in 1996, which was the first time we externalised the investor base and raised money mostly in North America. At that time the fund was comprised of about 30% external and 70% South African investors. We invested that quite quickly and then in 1998 we started raising Fund 4, where we raised $358m, which was double the amount we raised in Fund 3. Clearly that was also a tough time — if you remember in 1998 there was the crisis — and in 2005 we raised our Fund 5, which was $750m, and we’ve just concluded Fund 6, which is $800m.
STV: So you’ve come a distance since 1992 when you started your first fund — what are the major trends that you’ve seen as far as private equity goes? You said it’s a maturing industry here in South Africa but what are you observing?
NC: The trend is mostly around accepting this is a legitimate source of capital to fund enterprises — so for sellers of businesses that are looking for ownership change this is an area they can tap, and more importantly management teams that are looking to grow their businesses are becoming more and more comfortable in coming to a private equity fund manager to source capital to fund their businesses. That trend has become quite well accepted. What’s also important is the asset class, from a returns perspective, has also been quite attractive to investors — so investors are now coming into private equity because the returns are superior to the relative benchmarks that are normally the publicly traded markets.
STV: What are investors looking for?
NC: The profile of a private equity investor is significant numbers are public pension funds, followed by corporate pension funds. Then we have funds of fund managers that are people that aggregate funds from smaller pension funds, then there’s high net worth individuals and endowments like universities that have investment arms. What they are looking for is to diversify the assets they have under management and provide that to different pockets of managers that can create value for the underlying. If we look at who are the beneficiaries of our efforts that’s the policy-holders in the corporate pension funds, pensioners that are in public pension funds, also ordinary people represented by the sovereign wealth funds.
STV: You’ve raised $800m in South Africa — why South Africa in particular? Looking at recent developments, whether that’s labour or politics, there is a bit of unease so are you concerned about that?
NC: A good question. In the first instance the kind of investors that we speak to are medium- to long-term investors in nature, so they would look beyond the noise. Clearly in their view they have seen South Africa and the rest of Africa as an attractive destination. This is driven mostly by the search for growth, where clearly South Africa has been growing moderately at between 3% and 4% the rest of Africa is growing above 6%. They’ve backed Ethos, which they believe is the right kind of manager that they can access that growth. It is, as you point out, a very challenging time, but we have a track record having been around 29 years and we are able to demonstrate that we are able to provide those returns we have in the past.
STV: What sectors are you keen on?
NC: Our strategy is to invest in businesses that have very strong and differentiated business models, that have strong management teams and strong cash flows. More specific to sectors we look for those with superior growth prospects. Currently it’s not rocket science that the consumer sector is interesting — we have invested there, and we think there is still some time to go. Again South Africa and the rest of the continent is a very strong commodity provider. There is a lot of infrastructure that’s being put in place to support this — clearly we as a manager don’t invest directly into infrastructure, but we look for businesses that will support this infrastructure roll-out.
STV: What is your strategy for the rest of Africa?
NC: We see the rest of the continent in two ways — first we have a mandate within our fund to invest directly, being up to 20% into consumer-facing companies of scale where we can partner with local like-minded investors. More importantly, we will invest in South African companies that are looking to exploit the growth that’s taking place in Africa. We’d like to partner with management teams and support them in that ambition.
source
Sunday, January 20, 2013
An African renaissance
An African renaissance
While western banks and financial institutions recoil in the aftermath of the global financial crisis, institutions from emerging markets are
scouring places like Africa for yield. Renaissance Capital, which was recently acquired by one of Russia's largest private investment funds, has
been active in Russia, the CIS, Central and Eastern Europe and Africa looking for high-risk, high-reward opportunities.
Charles Robertson, Renaissance's global chief economist and head of macro strategy, is the lead co-author of the book The Fastest Billion, published in October
2012 by Renaissance Capital. The book charts Africa's rise as an economic growth engine, and where the opportunities lie.
In an emailed interview with alfiarabia.com, Mr. Robertson explains how to play the risky, but rewarding African continent:
Q: How much has Renaissance Capital invested in Africa, and where do you see the greatest opportunities (which sectors and which countries)?
Charles Robertson: Renaissance Capital began investment banking operations in Africa in 2006. With offices across Africa, and over USD5-billion in
capital-raising and financial advisory transactions, Renaissance has established itself as the international investment firm with the strongest local presence on the
African continent.
For investors who are happy to invest for 5-7 years and not think about the investment again until 2020 - then private equity is the obvious option. However, for
investors who would like the opportunity to exit an investment, then the country choices are more limited.
For equity investors, looking at Africa as a whole, the biggest market is the domestic South African market, which is well established, bigger in the MSCI than
Russia, and where some stocks offer exposure to the Africa theme.
Domestic pension funds are massive, equivalent to 60% of GDP, and keep the market supported.
Next largest is Egypt, but there is obvious political risk - our analysis suggests there are strong similarities with Turkey in the mid-1970s (based on per capita
GDP, in PPP constant 2005 dollars).
The large budget deficit and public debt ratios are additional concerns. After that comes Nigeria - the largest population in Africa - with 170 million, strong
growth for over a decade, a very well regarded economics team (the central bank governor has won numerous awards for best central bank governor), an excellent
finance minister (who was a contender to take over the World Bank), and others from agriculture to trade and industry.
Public debt ratios are around 10% of GDP, the budget deficit is small and there is a current account deficit. With the largest equity market by far in SSA
(sub-Saharan Africa), this is an obvious country to invest in. Kenya too is interesting, but far smaller. Beyond these two, Zimbabwe (with political risk) and Ghana
(illiquid) are interesting.
Another option is debt securities. Dollar debt yields have now plunged. Nigeria 2021 Eurobonds yield just 3.7% in dollars. More interesting is the NGN local
currency debt in Nigeria, at around 12% yields, and with sometimes similar in Kenya.
Q: How would you advise Middle East funds to invest in Africa - where can they add value? Do you think ME interest would be limited to investing
in agriculture lands and oil assets?
CR: The big themes from growth include banking and consumer stocks, as well as mining and oil assets which are more exposed to the global story.
Agriculture assets are more rare - though companies like Zambeef do exist. Telecoms also have expanded considerably and as more services like banking migrate
to the mobile phone, this may be another way to play the consumer story. Access to real estate should also be interesting.
Q Your book appears to be very bullish on the continent, but where do you see the challenges? What could go wrong that would curtail
investments in Africa?
CR: Politics is always a risk. There has been a significant political shift in Africa. From just a very few democracies in 1990, now there are over 30 countries
counted as democracies by Freedom House or the Polity IV database.
But democracies at this income level are fragile (see Mali), and there is a less than 10% chance each that the poorest democracies become autocracies again.
This is more likely when incomes are falling - so a combination of a commodity price plunge, and a coup, and poor policy choices by incoming leaders - could
derail the story. However, we struggle to find risk-free investments anywhere in the world when central banks inject so much liquidity - we just believe you get a
better risk-adjusted return in Africa.
Q: Which countries in your opinion offer the greatest promise and why?
CR: Nearly the whole continent is showing improvement, which has been helped by responsible fiscal policies - debt levels have fallen to around 35% of GDP in SSA
while G-7 debt has risen to 120% of GDP.
Leading officials are better qualified than ever. The positive example set by Asian, Latin American and Emerging European countries provide an ever larger
template of "best policy" choices to follow. Georgia's success in being one of the top 10 countries in the world in the Ease of Doing Business survey by the World
Bank has directly influenced Rwanda, which became the first SSA country to ever top the list of most improved country (in the 2010 survey). Ghana and Rwanda are
both very interesting but it is Nigeria which investors will find easiest to access.
Q: A major issue in Africa is skilled, educated labour. Do you think African states are addressing the issues adequately - what more needs to be done to address
education and training?
CR: The improvement in education is a crucial reason - perhaps THE crucial reason - why Africa now has the billion people who have experienced the fastest
growth the continent has ever seen.
The number of SSA secondary school age children getting an education has trebled from under 9% in 1975 to around 30% in 2005. That sounds low - but it is the
same figure that Mexico and Turkey achieved in 1975, just ahead of their industrialization in the 1980s, leading both into the OECD and giving both full emerging
market status by the 1990s. Back in the 1970s, Africa attracted no foreign direct investment (less than 1% of GDP annually).
Today Africa gets 2-4% of GDP annually. This is helping bring skills to the workforce. Continued investment in education is reaping benefits and while more needs
to be done, education is now at levels sufficient to double GDP every decade.
Q Corruption and lack of legal and business frameworks is another key issue facing foreign investors in Africa? Do you believe states are
addressing these issues sincerely?
CR: Corruption is normal in poor countries. In rich countries, whether they are strong monarchies as in the Gulf, or western democracies, the corruption
perceptions index gives a much better score than in any poor country. As countries get richer, corruption falls.
The best way to reduce corruption is to invest in poor countries and help drive growth at a faster pace. Some countries have better corruption indicators than their
per capita GDP levels imply they should - Africa is fortunate in having many more countries that outperform on this index, than underperform.
The underperformers include Libya, Angola and some other (mainly) oil producing nations. Nigeria has improved its rating significantly in the past 10 years - in
fact, it is the third best improver from 2001 to 2011 - and has a "normal" level of corruption.
The outperformers include countries like Rwanda and Botswana, where corruption is less than it "should" be. A number of governments are making reforms that
improve the Ease of Doing Business - here we have to praise the World Bank for introducing a survey which enables us to show this progress. Rwanda - as noted
above - is best.
Q: You singled out healthcare as an investment opportunity for investors in your introduction - what are the other areas that are ripe for the
picking?
CR: Investment in infrastructure is obviously needed, and is normal at this stage of development (after a ten-year boom). The electricity sector needs to be
improved, and privatization in Nigeria is happening which will enable that to happen. With better electricity provision, countries can start to invest in manufacturing.
© alifarabia.com 2013
Saturday, January 19, 2013
Dealmakers Dreaming of African Riches Move Bankers to Next China
Dealmakers Dreaming of African Riches Move Bankers to Next China
2013-01-17 22:00:00.3 GMT
By Matthew Campbell, Aaron Kirchfeld and Chris V. Nicholson
Jan. 18 (Bloomberg) -- In his ten-year career as a banker at Lazard Ltd., Matthieu Pigasse has advised on some of Frances biggest deals, including the $50 billion utility merger that created GDF Suez in 2008. Yet one humid evening last July, he could be found in Congos capital city of Brazzaville, hoping to catch the last ferry across the river for meetings in Kinshasa.
In September, Lazard announced that Pigasse, who lives in Paris, would head up a team that now numbers more than a dozen bankers dedicated to mergers in the region based in the French capital. He now spends about a third of his time criss-crossing Africa.
It is the new frontier, says Pigasse, 44. The potential of the M&A market will be big in the coming years. It is not huge now, but we believe because of the growth prospects we have to be there.
Banks including Citigroup Inc., Barclays Plc and Standard Chartered Plc are also gradually expanding their presence in the region, the worlds second-fastest growing area after Asia, according to the International Monetary Fund. While the numbers are modest, the expansion is coming while banks are paring workers across Europe, the U.S. and emerging countries.
Being first will be a big advantage, said Crispin Osborne, who oversees Barclayss African investment banking operations from London and is planning to hire on-the-ground investment-banking staff in East and West Africa this year.
You simply cant ignore the fact that urbanization and economic growth will determine the long-term outlook.
Largest Deal
Takeovers and private-equity investments in Africa have so far focused on natural resources and telecommunications, reflecting a continent rich in commodities and fast to adopt mobile technology. The regions largest deal ever remains Bharti Airtel Ltd.s $10 billion acquisition of the African mobile assets of Kuwaits Zain in 2010.
Interest in the regions consumer and retail sector has also surged as investors look to benefit from a rising middle class. Wal-Mart Stores Inc., the worlds largest retailer, paid
16.5 billion rand ($2.42 billion) for a 51 percent stake in Johannesburg-based Massmart last year.
Every corner of the globe wants a consumer play in Africa, said Brian Smith, who oversees investment banking in Sub-Saharan Africa from Johannesburg for JPMorgan Chase & Co., which has advised on deals from Wal-Marts acquisition of Massmart to providing the financing facility to Ethiopian Airlines to purchase Boeing 787 planes.
Rapid Urbanization
With 52 cities with a population of more than 1 million, more than Europe and the U.S. combined, and 738 million mobile phone users, theres undoubtedly growth to be tapped.
Urbanization is starting to take place pretty rapidly across the continent, driving consumer demand, according to Nicholas Young, who runs Citis African operations from Johannesburg.
Bankers increased focus on Africa is taking place even as they retrench in emerging markets in Latin America, Asia and the Middle East, where once-rapid growth is slowing. Citigroup announced plans last month to eliminate 11,000 positions in countries from Pakistan to Paraguay even as it said its 1,300- employee African operations, which include Nigeria, Uganda and Kenya, wouldnt be affected. In December, Barclays agreed to a
$2.1 billion deal to increase its stake in Absa Group Ltd. and combine its African operations with the Johannesburg-based lender.
Africans Returning
The continents growth has drawn attention from expatriate African bankers in hubs like New York and London. We constantly get a flood of good CVs that come to us, including from a lot of Africans whove worked abroad and see opportunity at home, said Axel Smeulders, who heads African M&A for Standard Chartered. The firm has about 15 M&A bankers based in Lagos and Johannesburg.
Even so, banks chasing African deals are playing a very long game. Investment banking fees in the region totaled about
$305 million in 2012, according to researcher Freeman & Co., doubling since a decade ago but still just a third of those paid out in the same period in Italy, which has less than one-tenth the population. Deal volume in 24 sub-Saharan African countries tracked by Bloomberg rose 12 percent to $35.4 billion last year from 2011, escaping the global decline in M&A.
Bankers enthusiasm is tempered by the challenges of operating in a region with unstable politics and nascent capital markets -- to say nothing of basics like unreliable roads or electric grids.
Traffic Nightmare
In Lagos, Nigerias commercial capital of 20 million people, the 18-mile drive to the airport can take two hours on a good day. When Citis Young was getting ready to welcome then- Chief Executive Officer Vikram Pandit to the city for the first time in 2010, an oil tanker flipped over on the highway, leaving the firms welcoming party to make a six-hour journey through winding backstreets to pick him up, Young said in an interview.
Africa has a lot to do in education, infrastructure, the judicial system, said James Tidmarsh, a Geneva-based lawyer who raises funds for mining projects in east and central Africa.
If someone owes you money, you need to be able to get that money back.
To buyout firms, those needs represent deals waiting to happen. Private-equity transactions in Sub-Saharan Africa jumped by 19 percent to 43 deals in the first nine months of last year, compared to a decline of 17 percent in China to 179 transactions, according to the Emerging Markets Private Equity Association.
Like China
The Washington, D.C.-based Carlyle Group LP established a nine-person team based in Lagos and Johannesburg for Sub-Saharan Africa last year. In November, Carlyle made its first sub- Saharan investment, joining other backers to put $210 million into agricultural supply-chain company Export Trading Group, based in Tanzania.
We saw sub-Saharan Africa as being where China was 15 years ago, and we wanted to be one of the first there, said Genevieve Sangudi, the Lagos-based managing director for Carlyles regional fund.
Private-equity firm KKR & Co. has hired Kayode Akinola in London from Helios Investment Partners, a private-equity firm focused on Africa, to lead the firms push into the continent.
Its indisputable that if Africa needs one thing, its patient capital and the deep industry sector expertise and experience to put that capital to work, said Akinola.
Pigasse recalled how observers skeptical about Brazil, India, Russia, and China were eventually proven wrong, and says the same will hold true for Africa.
Two, three, four years from now, it will become a very important market, he said.
--With assistance from Larry Reibstein in New York. Editors:
Larry Reibstein, Chris V. Nicholson
To contact the reporters on this story:
Matthew Campbell in London at or mcampbell39@bloomberg.net; Aaron Kirchfeld in London at or akirchfeld@bloomberg.net; Chris V. Nicholson in Paris at or cnicholson22@bloomberg.net
To contact the editor responsible for this story:
Jacqueline Simmons at or jackiem@bloomberg.net
2013-01-17 22:00:00.3 GMT
By Matthew Campbell, Aaron Kirchfeld and Chris V. Nicholson
Jan. 18 (Bloomberg) -- In his ten-year career as a banker at Lazard Ltd., Matthieu Pigasse has advised on some of Frances biggest deals, including the $50 billion utility merger that created GDF Suez in 2008. Yet one humid evening last July, he could be found in Congos capital city of Brazzaville, hoping to catch the last ferry across the river for meetings in Kinshasa.
In September, Lazard announced that Pigasse, who lives in Paris, would head up a team that now numbers more than a dozen bankers dedicated to mergers in the region based in the French capital. He now spends about a third of his time criss-crossing Africa.
It is the new frontier, says Pigasse, 44. The potential of the M&A market will be big in the coming years. It is not huge now, but we believe because of the growth prospects we have to be there.
Banks including Citigroup Inc., Barclays Plc and Standard Chartered Plc are also gradually expanding their presence in the region, the worlds second-fastest growing area after Asia, according to the International Monetary Fund. While the numbers are modest, the expansion is coming while banks are paring workers across Europe, the U.S. and emerging countries.
Being first will be a big advantage, said Crispin Osborne, who oversees Barclayss African investment banking operations from London and is planning to hire on-the-ground investment-banking staff in East and West Africa this year.
You simply cant ignore the fact that urbanization and economic growth will determine the long-term outlook.
Largest Deal
Takeovers and private-equity investments in Africa have so far focused on natural resources and telecommunications, reflecting a continent rich in commodities and fast to adopt mobile technology. The regions largest deal ever remains Bharti Airtel Ltd.s $10 billion acquisition of the African mobile assets of Kuwaits Zain in 2010.
Interest in the regions consumer and retail sector has also surged as investors look to benefit from a rising middle class. Wal-Mart Stores Inc., the worlds largest retailer, paid
16.5 billion rand ($2.42 billion) for a 51 percent stake in Johannesburg-based Massmart last year.
Every corner of the globe wants a consumer play in Africa, said Brian Smith, who oversees investment banking in Sub-Saharan Africa from Johannesburg for JPMorgan Chase & Co., which has advised on deals from Wal-Marts acquisition of Massmart to providing the financing facility to Ethiopian Airlines to purchase Boeing 787 planes.
Rapid Urbanization
With 52 cities with a population of more than 1 million, more than Europe and the U.S. combined, and 738 million mobile phone users, theres undoubtedly growth to be tapped.
Urbanization is starting to take place pretty rapidly across the continent, driving consumer demand, according to Nicholas Young, who runs Citis African operations from Johannesburg.
Bankers increased focus on Africa is taking place even as they retrench in emerging markets in Latin America, Asia and the Middle East, where once-rapid growth is slowing. Citigroup announced plans last month to eliminate 11,000 positions in countries from Pakistan to Paraguay even as it said its 1,300- employee African operations, which include Nigeria, Uganda and Kenya, wouldnt be affected. In December, Barclays agreed to a
$2.1 billion deal to increase its stake in Absa Group Ltd. and combine its African operations with the Johannesburg-based lender.
Africans Returning
The continents growth has drawn attention from expatriate African bankers in hubs like New York and London. We constantly get a flood of good CVs that come to us, including from a lot of Africans whove worked abroad and see opportunity at home, said Axel Smeulders, who heads African M&A for Standard Chartered. The firm has about 15 M&A bankers based in Lagos and Johannesburg.
Even so, banks chasing African deals are playing a very long game. Investment banking fees in the region totaled about
$305 million in 2012, according to researcher Freeman & Co., doubling since a decade ago but still just a third of those paid out in the same period in Italy, which has less than one-tenth the population. Deal volume in 24 sub-Saharan African countries tracked by Bloomberg rose 12 percent to $35.4 billion last year from 2011, escaping the global decline in M&A.
Bankers enthusiasm is tempered by the challenges of operating in a region with unstable politics and nascent capital markets -- to say nothing of basics like unreliable roads or electric grids.
Traffic Nightmare
In Lagos, Nigerias commercial capital of 20 million people, the 18-mile drive to the airport can take two hours on a good day. When Citis Young was getting ready to welcome then- Chief Executive Officer Vikram Pandit to the city for the first time in 2010, an oil tanker flipped over on the highway, leaving the firms welcoming party to make a six-hour journey through winding backstreets to pick him up, Young said in an interview.
Africa has a lot to do in education, infrastructure, the judicial system, said James Tidmarsh, a Geneva-based lawyer who raises funds for mining projects in east and central Africa.
If someone owes you money, you need to be able to get that money back.
To buyout firms, those needs represent deals waiting to happen. Private-equity transactions in Sub-Saharan Africa jumped by 19 percent to 43 deals in the first nine months of last year, compared to a decline of 17 percent in China to 179 transactions, according to the Emerging Markets Private Equity Association.
Like China
The Washington, D.C.-based Carlyle Group LP established a nine-person team based in Lagos and Johannesburg for Sub-Saharan Africa last year. In November, Carlyle made its first sub- Saharan investment, joining other backers to put $210 million into agricultural supply-chain company Export Trading Group, based in Tanzania.
We saw sub-Saharan Africa as being where China was 15 years ago, and we wanted to be one of the first there, said Genevieve Sangudi, the Lagos-based managing director for Carlyles regional fund.
Private-equity firm KKR & Co. has hired Kayode Akinola in London from Helios Investment Partners, a private-equity firm focused on Africa, to lead the firms push into the continent.
Its indisputable that if Africa needs one thing, its patient capital and the deep industry sector expertise and experience to put that capital to work, said Akinola.
Pigasse recalled how observers skeptical about Brazil, India, Russia, and China were eventually proven wrong, and says the same will hold true for Africa.
Two, three, four years from now, it will become a very important market, he said.
--With assistance from Larry Reibstein in New York. Editors:
Larry Reibstein, Chris V. Nicholson
To contact the reporters on this story:
Matthew Campbell in London at or mcampbell39@bloomberg.net; Aaron Kirchfeld in London at or akirchfeld@bloomberg.net; Chris V. Nicholson in Paris at or cnicholson22@bloomberg.net
To contact the editor responsible for this story:
Jacqueline Simmons at or jackiem@bloomberg.net
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