Private Equity
About Private Equity
Private equity is an investment category offering substantial benefits to investors, entrepreneurs and economies as a whole.
At African Alliance Private Equity, providing private equity capital to developing economies in which we are active is critical to our role as a promoter of economic growth and local entrepreneurial empowerment.
Private equity is a distinct asset class and generally refers to equity finance for unlisted companies at many stages, from start-up to expansion. It also includes management buy-outs and buy-ins of established companies with real growth potential that can be enhanced with private equity support. Private equity funds receive their capital from investors seeking higher-than-normal returns within acceptable risk parameters. The private equity funds then invest in a diverse portfolio of growing companies. This diversification reduces investors’ overall risk, while enhancing returns.
We believe structuring a private equity fund effectively can add significant value to investors, local entrepreneurs and the national economy. Private equity investors have a considerable impact on productivity, skills development, national competitiveness and job creation, because the process includes transfer and exchange of know-how and not only the flow of capital.
A thorough knowledge of all applicable laws and regulatory bodies is critical before attempting to structure a private equity fund. Our local presence allows us to structure workable solutions in a domestic environment rather than trying to replicate international models simply because they work elsewhere.
Our private equity funds have enjoyed substantial support from local investors and asset managers. Our returns have been favourable and our record of capital preservation exceptional. As a result, we are the appointed managers of private equity funds in various African countries where our experience, world-class systems and transactional knowledge give us a distinct advantage over other private equity players.
We provide full private equity fund management services to existing funds. These include deal origination, transaction management, post-investment management and administrative support.
Investment process
African Alliance Private Equity’s approach to investing can be described as ‘management-centric’ and is guided by:
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Quality of the management team – we need to know management is dynamic, energetic, financially committed and understands the ‘sweet spots’ of its business and industry.
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Nature of business or concept – prior to investing we ensure our in-depth understanding of the viability, robustness and growth prospects of any business within its industry.
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Pricing and prudent capital structure – our analysis of any investment opportunity is underpinned by rigorous due diligence and an intense focus on value. Although it is impossible to detail a precise formal investment process that will be slavishly followed in every investment, a disciplined process guides our assessment of potential investments:
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Research
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Initial review
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Full business review
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Valuation
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Presentation to Investment Committee
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Structuring
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Shareholder agreement
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Due diligence
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Transactional risk assessment
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Investment committee approval
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Implementation
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Post-transaction management
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Investment focus
African Alliance Private Equity takes varying equity stakes in high-growth businesses with sound management teams.
We do not intervene in the day-to-day management of the business, but require adequate protection mechanisms for our investment. Through transaction structuring and post-investment management, we aim to maximise the value of the business for the benefit of all stakeholders.
We are particularly interested in medium-sized businesses with the following attributes:
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Export and manufacturing businesses requiring expansion capital to grow operations and international markets
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Businesses that supply goods and services to core industries driving economies, but that need acquisition, development or buy-out funding
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Underrated businesses or those operating in out-of-favour industries.
Portfolio companies will need to demonstrate significant upside potential based on strong growth prospects, and display certain criteria, including:
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Undervalued opportunities
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Sound financial structure
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Solid returns
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Capable management teams