Private Equity
About Private Equity
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Private equity is an investment category offering substantial benefits to investors, entrepreneurs and economies as a whole.
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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.
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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.
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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.
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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.
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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
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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
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African Alliance Private Equity takes varying equity stakes in high-growth businesses with sound management teams.
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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.
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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