SAVCA 2016 Private Equity Industry Survey
SAVCA Venture Capital and Private Equity Industry Performance Survey of Southern Africa covering the 2015 Calendar Year
Research Partner cliffedekkerhofmeyr.com TLG6652
SMART FROM POWERFUL PARTNERSHIPS COME POWERFUL SOLUTIONS
PRIVATE EQUITY
At CDH we believe that consistency, knowledge of our clients and deep experience sets us apart. Through working together with LPs, GPs, portfolio companies and management teams, we have gained invaluable insight into the private equity sector. We tailor our services through dedicated, full-service and bespoke teams that are led by experts in their respective fields. This ensures that fund structures are optimised and that portfolio acquisitions and exits are concluded efficiently and pragmatically, with management teams and BEE investors firmly on board. Partner with us and experience the trusted reputation that our clients have come to rely on.
Cliffe Dekker Hofmeyr. The private equity legal partner for your business. cliffedekkerhofmeyr.com TLG6652 Contents
Foreword 2
1 | Highlights 4
2 | Funds under management 8
3 | Fund raising activity 18
4 | Investment activity 24
5 | Analysis of BEE investment 32
6 | Exits 34
7 | Performance 40
8 | Private equity investment professionals 44 SMART 9 | Data tables 46 FROM POWERFUL PARTNERSHIPS COME POWERFUL SOLUTIONS 10| Participants 48 11| Source of information 52
12| Glossary 54
Sunset at the rock formation 'La Fenetre' near Isalo, Madagascar.
PRIVATE EQUITY
At CDH we believe that consistency, knowledge of our clients and deep experience sets us apart. Through working together with LPs, GPs, portfolio companies and management teams, we have gained invaluable insight into the private equity sector. We tailor our services through dedicated, full-service and bespoke teams that are led by experts in their respective fields. This ensures that fund structures are optimised and that portfolio acquisitions and exits are concluded efficiently and pragmatically, with management teams and BEE investors firmly on board. Partner with us and experience the trusted reputation that our clients have come to rely on.
Cliffe Dekker Hofmeyr. The private equity legal partner for your business. SAVCA 2016 Private Equity Industry Survey | 1 Foreword
As the industry representative of private equity and venture capital in Southern Africa, we’re pleased to publish the SAVCA 2016 Private Equity Industry Survey. This report, now in its sixteenth year of production, is amongst the most comprehensive and enduring surveys of its kind for the asset class internationally, and enables SAVCA to comment authoritatively on trends in private equity in Southern Africa.
The standout theme from this survey, which covers activity during 2015, is the notable pick-up in fund raising by private equity managers: R29.0 billion was raised in 2015, up from R11.8 billion in 2014 and the highest on record for the industry (excluding allocations by South Africa’s Government Employees Pension Fund to the PIC). The vast majority of this capital was sourced by independent fund managers from third-party investors for late-stage mandates.
Brisk capital raising contributed to growth in industry-wide funds under management, which totalled R165.3 billion at the end of 2015, compared to R150.3 billion at the end of the previous year (data excludes funds under management by the PIC). The industry has clocked compounded annual growth of 11.9% since the survey commenced in 1999.
Funds under management include R40.6 billion in undrawn commitments (2014: R41.6 billion), which will be called upon in the next few years as managers implement their investment strategies.
The value of investment activity during 2015 reached R10.5 billion (2014: R13.9 billion), of which R4.4 billion was for follow-on investments and R6.1 billion for new investments. By value, most of the deal activity was centred on late-stage assets in financial services, retail, infrastructure and manufacturing, reflecting the generalist nature of the Southern African private equity industry.
BEE remains a significant feature and driver of private equity in South Africa. Nearly two-thirds of the value of deals done in 2015 entailed investee companies with BEE ratings of four or better.
Realisations totalled R4.5 billion (2014: R5.6 billion), with trade sales being the most prominent exit route by value. The industry returned R8.9 billion in funds to investors in 2015 (2014: R11.0 billion), which includes proceeds from realisations, dividends, loan repayments and interest representing a times money multiple of 1.9 times (2014: 2.3).
There was an increase in the participation of the number of private equity fund managers in this year’s survey: Having approached 110 potential respondents, we received completed questionnaires from 72 managers (2014: 59) representing 84 funds (2014: 76). This information was augmented through alternative sources for a further 10 managers representing 18 funds.
We thank SAVCA members for their support and involvement, which enabled us to produce this survey.
KPMG South Africa has been our research partner for this survey and was, once again, responsible for gathering, processing and analysing the very large volume of data. We are grateful to Michael Rudnicki, Bridget Blackburn and Julie Booysen for their unflagging commitment to this survey.
Erika van der Merwe CEO: Southern African Venture Capital and Private Equity Association
2 | SAVCA 2016 Private Equity Industry Survey
Highlights1
4 | SAVCA 2016 Private Equity Industry Survey Highlights
• South Africa’s private equity industry, including both private and government funds (excluding the Public Investment Corporation (PIC)), had R165.3 billion in funds under management (FUM) at 31 December 2015, an increase from R150.3 billion at 31 December 20141. This represents a compound annual growth rate of 11.9% since 1999, when the survey first began.
• Had the PIC been included in the total FUM at 31 December 2015 and 31 December 2014, and assuming that the 2015 PIC FUM remained constant with 2014, the total industry FUM would have increased from R189.9 billion in 2014 to R204.9 billion in 2015.
• Of FUM at the end of 2015, R40.6 billion were in undrawn commitments. R21.0 billion was available for future investments exclusively in South Africa and R19.6 billion for Pan Africa (the latter includes the mandate to invest in South Africa and the rest of Africa).
• Of the R40.6 billion in undrawn commitments, 85.5% is committed to Independents (R34.7 billion), 11.3% to Captives – Financial Services (R4.6 billion), 0.7% to Captives – Government (R0.3 billion) and 2.5% (R1.0 billion) to Captives - Other.
• R29.0 billion was raised in 2015, an increase from the R11.8 billion raised in 2014. The bulk of funds raised (95.9% or R27.8 billion) is for late-stage investments.
• Of funds raised during 2015, 75.8% were from South African sources (2014: 55.2%). South Africa has been the source of 54.7% of cumulative funds raised to date and not yet returned to investors (2014: 46.6%)
• Investment activity for Independents only, as a percentage of GDP, was 0.2% (2014: 0.1%). This compares with 1.9% for the UK and 1.4% for the US.
• The value of new investments totalled R10.5 billion during 2015, compared with R13.9 billion in 2014. Of the R10.5 billion invested, R4.4 billion was for follow-on investments, and R6.1 billion for new investments.
• Funds returned to investors in 2015 totalled R8.9 billion, a 19.1% decline from the R11.0 billion returned to investors during 2014.
1 The PIC did not participate in this year’s survey, and thus no 2015 data is available for the PIC. The PIC is not participating as it is the PIC’s belief that the nature of their investments within private equity includes investments in assets which may not necessarily constitute private equity in the traditional sense. PIC data, previously classifi ed under Captives-Government, has been removed from historical survey data to ensure comparability over time.
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Composition of total FUM (Rbn) Third-party funds raised during the year, analysed by fund stage (Rbn)*
Captives – Government Late stage Independents Early stage Captives – Financial Services Captives – Other Investment Holding Company 29.0 27.8 1.2
165.3 26.6 150.3 101.9 18.3 28.3 127.0 90.5 8.5 19.0 32.6 114.2 114.5 114.0 59.0 8.9 109.4 21.1 24.0 17.6 30.3 105.4 54.8 57.6 58.7 14.0 11.4 12.1 24.0 21.7 27.6 15.4 53.7 7.3 48.3 12.3 10.3 9.4 15.3 86.3 31.2 39.7 2.0 0.9 0.7 14.5 0.1 12.3 10.5 14.5 5.3 11.8 42.9 11.4 11.3 10.7 11.1 59.2 24.7 10.6 11.2 11.1 8.5 9.9 0.7 10.1 6.4 0.2 0.2 2.1 0.8 39.7 42.5 24.5 35.9 37.0 39.3 5.8 7.0 18.4 7.1 6.2 5.2 14.2 13.9 6.2 13.3 12.0 15.2 4.9 10.2 11.9 13.9 5.2 8.3 4.2 3.6 8.7 7.8 7.7 3.6 10.3 10.5 0.7 3.3 2.2 1.1 1.3 2.2 2.2 0.3 1.4 0.6 1.1 2.2 2.2 0.5 0.2
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
* Funds raised include funds that may be invested in South Africa or other African countries not specified.
Cost of investments made during the year, analysed Funds returned to investors during the year (Rbn) by new and follow-on investments (Rbn)
Follow-on investments Pepkor & Premier disposal (R5.2 billion)
New investments Venfin disposal (R8.8 billion)
Vodacom disposal (R16.0 billion)
Funds returned to investors
26.1 1.4
5.2 18.9
16.5
13.9 13.4 11.8 11.1 8.2 10.5 8.8 8.8 5.8 6.2 6.9 7.2 6.5 5.6 5.0 4.4 1.5 4.3 1.8 4.5 2.9 16.0 2.4 3.5 0.7 1.3 0.4 1.4
2.0 2.1 3.6 4.7 3.2 5.4 24.7 10.7 4.3 6.2 7.7 6.1 7.6 7.7 6.1 1.0 1.5 2.4 4.5 4.0 4.4 10.5 6.2 2.0 9.3 20.5 7.0 9.8 11.0 8.9 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
SAVCA 2016 Private Equity Industry Survey | 7 Funds under management
8 | SAVCA 2016 Private Equity Industry Survey 2
Funds under management
• The survey reflects that the South African private equity industry has a total of R165.3 billion in funds under management (FUM). This is a R15.0 billion increase from the R150.3 billion in FUM at 31 December 2014.2, 3
• The industry has achieved a compound annual growth rate of 11.9% in total FUM since 1999, when the survey began.
• FUM by Independents have increased by R11.5 billion, from R90.4 billion at 31 December 2014 to R101.9 billion at 31 December 2015.
• Total FUM by Captives – Financial Services decreased by R4.3 billion, from R32.6 billion at 31 December 2014, to R28.3 billion at 31 December 2015.
• The Captives – Government category increased from R18.3 billion in 2014 to R26.6 billion in 2015.
• Total undrawn commitments at 31 December 2015 reached R40.6 billion (2014: R41.6 billion), of which R34.7 billion (2014: R35.1 billion) reflects the undrawn commitments of independent fund managers.
• Private equity fund managers predominantly have a generalist mandate, with more than two thirds of the FUM at 31 December 2015 in the category Generalist.
2 The PIC did not participate in this year’s survey, and thus no 2015 data is available for the PIC. The PIC is not participating as it is the PIC’s belief that the nature of their investments within private equity includes investments in assets which may not necessarily constitute private equity in the traditional sense. PIC data, previously classified under Captives-Government, has been removed from historical survey data to ensure comparability over time.
3 The total FUM includes Pan-African funds which have an element of undrawn commitments that may be invested in South Africa or other African countries not specified.
SAVCA 2016 Private Equity Industry Survey | 9
Funds under management
Figure 1 | Total FUM
Independents (55 Managers) Captives – Financial Services (12 Managers) Captives – Government (4 Managers) Captives – Government (PIC) Captives – Other (6 Managers)
4% 5%
19% 21%
2015 – R204.9 bn 2014 – R189.9 bn 50% 47% Includes the PIC* Includes the PIC
13% 10%
14% 17%
* Data included here for the PIC is illustrative and is based on an assumption that PIC FUM remained constant with 2014
Independents (55 Managers)
Captives – Financial Services (12 Managers) Captives – Government (4 Managers) Captives – Other (6 Managers)
5% 6%
16% 12%
2015 – R165.3 bn 2014 – R150.3 bn 62% 60% Excludes the PIC Excludes the PIC
17% 22%
10 | SAVCA 2016 Private Equity Industry Survey Funds under management
Figure 2 | Composition of total FUM (Rbn)
Captives – Government 165.3 Independents 26.6 150.3 101.9 Captives – Financial Services 18.3 28.3 127.0 90.5 8.5 Captives – Other 19.0 32.6 114.2 114.5 114.0 59.0 8.9 Investment Holding Company 109.4 21.1 24.0 17.6 30.3 105.4 54.8 57.6 58.7 14.0 11.4 12.1 24.0 21.7 27.6 53.7 7.3 48.3 12.3 10.3 9.4 86.3 31.2 39.7 2.0 0.9 0.7 12.3 10.5 42.9 5.3 59.2 24.7 10.1 6.4 39.7 42.5 24.5 35.9 37.0 39.3 5.8 7.0 18.4 7.1 6.2 5.2 14.2 13.9 6.2 13.3 12.0 15.2 11.9 13.9 5.2 8.3 10.2 7.8 7.7 10.3 10.5 8.7
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure 3 | Composition of total FUM at 31 December by the focus of the fund
Agri and agri processing General Infrastructure Energy and related Healthcare Other Financial Services ICT Real Estate
1.6% 1.7% 0.2% 3.7% 0.4 1.6% 3.7% 0.4% 10.7% 11.6% 7.6% 14.4% 0.3% 1.1%
0.2% 1.4%
2015 – R165.3 bn 2014 – R150.3 bn
67.4% 72.0%
SAVCA 2016 Private Equity Industry Survey | 11
Funds under management
Figure 4 | Total FUM at 31 December, split by undrawn commitments and investments (Rbn)
Undrawn commitments Invested 165.3
150.3
127.0 40.6 114.2 114.5 114.0 109.4 105.4 41.6
86.3 30.6 39.3 35.9 33.3 40.6 35.0 59.2 31.6 39.7 42.5 35.9 37.0 39.3 25.3 7.7 7.9 13.8 13.8 16.0
28.2 29.0 25.5 25.9 26.5 33.9 54.7 68.8 70.4 78.3 83.9 80.7 87.7 108.7 124.7 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure 5 | Total FUM by type, split by undrawn commitments and invested (Rbn)
Invested (R124.7 bn) Invested (R108.7 bn) Undrawn commitments (R40.6 bn) Undrawn commitments (R41.6 bn)
101.9 90.4
34.7 35.1
32.6 26.6 4.8 28.3 0.3 4.6 18.3 8.5 8.9 1.0 1.7
67.2 23.7 26.3 7.5 55.3 27.8 18.3 7.2 Independents Captives – Captives – Captives – Independents Captives – Captives – Captives – Financial Government Other Financial Government Other services services As at 31 December 2015 As at 31 December 2014
12 | SAVCA 2016 Private Equity Industry Survey 14761
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Funds under management
Figure 6 | Total FUM at 31 December, split by invested and geographical undrawn commitments (Rbn)
Undrawn commitments Pan Africa + Rest of Africa + Outside Africa Undrawn Commitments South Africa Invested 165.3
150.3 19.6 16.9 127.0 21.0 114.2 114.5 114.0 109.3 105.4 15.8 24.7 13.4 15.4 15.5 17.7 86.3 15.0 23.5 17.2 18.2 17.9 25.0 20.0 59.2 31.6 39.7 42.5 35.9 36.9 39.3 25.3 7.7 7.9 13.8 13.8 16.0
28.2 29.0 25.5 25.9 26.5 33.9 54.7 68.8 70.4 78.3 83.9 80.7 87.7 108.7 124.7 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure 7 | Classification of undrawn commitments by stage of investments (Rbn)
Late stage Early stage
41.6 40.5 40.6
35.9 35.0 34.9 33.3 30.6
25.2 28.3 31.1 36.8 35.5 33.1 40.5 38.9 3.7 1.9 0.4 5.4 5.0 3.8 1.1 1.7 2008 2009 2010 2011 2012 2013 2014 2015
14 | SAVCA 2016 Private Equity Industry Survey Funds under management
Figure 8 | Classification of undrawn commitments by type of fund manager (Rbn)
Captives – Government Independents Captives – Financial Services Captives – Other
40.5 40.6 2.1 41.6 0.3 39.3 28.0 35.4 35.1 34.7 30.9 2.4 0.1 4.8 4.6 35.0 6.6 8.0 23.5 30.4 33.1 1.7 1.0 23.2 1.8 11.2 9.6 0.1 26.0 0.6 2.2 23.1 5.3 5.5 1.8 1.7
2008 2009 2010 2011 2012 2013 2014 2015
Figure 9 | Composition of late stage, independent undrawn commitments by focus of the fund (Rbn)
Mining and Resources Mezzanine Other 34.0 Infrastructure 33.8 33.4 0.4 0.6 3.7 6.8 4.5 General 3.4 10.7 1.5 1.2 15.9 27.4 25.1 25.7 0.4 25.5 12.3 2.2 0.3 1.3 12.7 21.1 20.1 21.0 22.0 8.5 0.7 0.1 0.3 4.5 6.0 12.3 2.1 14.9 12.8
2008 2009 2010 2011 2012 2013 2014 2015
SAVCA 2016 Private Equity Industry Survey | 15
Funds under management
Figure 10 | Composition of FUM by BEE level of fund managers at 31 December
Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 Undisclosed or non-compliant or not drawn down
2.1%
13.7%
4.4%
3.5% 0.1% 2015 0.8% 49.5% Total FUM by BEE 0.1% level of fund manager
25.8%
1.7%
13.8%
3.2% 2.4% 0.1% 1.0% 0.2% 2014 49.7% Total FUM by BEE level of fund manager
27.9%
16 | SAVCA 2016 Private Equity Industry Survey
Funds under management
Comparison to the global market
• Although the South African private equity industry as a whole is relatively small in comparison to those of the US and UK, it is well established and locally significant.
• Using EMPEA information, together with survey data for South Africa, South Africa has investment activity as a percentage of GDP for 2015 of 0.20% (2014: 0.12%).
Figure 11 | Global private equity capital penetration (as a % of GDP)
2014 2015
1.59 UK 1.95 1.45 USA 1.41 0.77 Israel 0.77 0.21 India 0.31 0.12 South Africa 0.20 0.20 South Korea 0.20 0.15 China 0.10 0.13 Brazil 0.09 0.05 Poland 0.09 0.13 Japan 0.07 0.13 SSA* 0.07 0.02 Indonesia 0.04 0.11 Nigeria 0.03 0.08 Mexico 0.03 0.02 MENA** 0.03 0.03 Turkey 0.01 <0.01 Russia <0.01
* Sub-Saharan Africa ** Middle East and North Africa
Source: EMPEA Q1 2016 Industry Statistics for Emerging Markets Private Capital
SAVCA 2016 Private Equity Industry Survey | 17 Fund raising activity
18 | SAVCA 2016 Private Equity Industry Survey 3
Fund raising activity
• The total of third-party funds raised by the industry in 2015 reached R29.0 billion, a 145.4% increase from the R11.8 billion reported for 2014.4
• Independents account for the majority of reported fund raising activity during 2015, accounting for 94.1% of funds raised during the year (2014: 85.4%).
• By regional source, R3.4 billion (60%) of total funds raised in 2015 was from South African sources.
• Pension and Endowment Funds were the source of 56.2% of all third-party funds raised during 2015 (2014: 25.0%). Governments, aid agencies and DFIs accounted for 24.4% in 2015 (2014: 57.7%) and private equity fund of funds made up 10.3% of funds raised in 2015 (2014: 4.4%).
• Cumulatively, of the funds raised but not yet returned to investors, South Africa is the main source of fund raising (54.7%), ahead of the UK (20.7%) and the US (9.8%).
Figure 12 | Third-party funds raised during the year, analysed by fund stage (Rbn)
Late stage 29.0 27.8 Early stage 1.2
15.4 15.3 14.5 0.1 14.5 11.8 11.4 11.3 11.1 10.6 11.2 10.7 11.1 0.7 8.5 0.2 9.9 0.2 2.1 0.8
4.9 4.2 3.6 3.6 0.7 3.3 2.2 1.1 1.3 2.2 2.2 0.3 1.4 0.6 1.1 2.2 2.2 0.5 0.2
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
4 Funds raised include funds that may be invested in South Africa or other African countries not specified.
SAVCA 2016 Private Equity Industry Survey | 19
Fund raising activity
Figure 13 | Source of third-party funds raised during 2015 for investment in South Africa only (Rbn)
Local source (R3.4 billion) Foreign source (R2.3 billion)
Pension and endowment funds 2.5 0.7 3.2
Government, aid agencies and DFIs 1.4 1.4
Private equity fund of funds 0.4 0.2 0.6
Private individuals 0.3 0.3
Insurance companies/institutions 0.1 0.1
Banks 0.1 0.1
Figure 14 | Source of third-party funds raised during 2014 for investment in South Africa only (Rbn)
Local source (R3.6 billion) Foreign source (R3.8 billion)
Pension and endowment funds 1.9 1.9
Government, aid agencies and DFIs 0.9 3.5 4.4
Private equity fund of funds 0.3 0.3
Private individuals 0.6 0.6
Insurance companies/institutions 0.1 0.1
Banks 0.1 0.1
20 | SAVCA 2016 Private Equity Industry Survey
Fund raising activity
Figure 15 | Geographical sources of third-party funds raised (% of total)
South Africa Rest of Europe Canada UK Rest of Africa Asia USA Middle East Other or unspecified
46.6
55.2 54.5 1.0
23.6
75.9 20.7
4.6
14.9 9.8
6.2 6.4 36.1 1.2 2.4 2.8 2.4 1.6 17.6 1.4 1.3 1.2 7.7 1.9 1.8 1.2 Funds raised during 2014 Funds raised during 2015 Funds raised to Funds raised to 31 Dec 2014 not yet 31 Dec 2015 not yet returned to investors returned to investors
SAVCA 2016 Private Equity Industry Survey | 21
Fund raising activity
Figure 16 | Emerging markets private equity fundraising totals by select markets (US$bn)
Russia
Brazil South Africa India China
32.4 0.3 7.2 0.7 2.6 21.6 26.4 0.6 2.9 1.1 7.3 14.5
18.5 0.6 15.9 2.8 16.5 1.1 0.1 0.3 2.6 14.2 4.1 2.5 11.4 14.7 1.5 0.6 0.2 2.1 0.7 3.2 1.6 1.9 0.5 9.8 10.3 8.6 4.2 1.2 7.9 0.2 10.3 0.5 0.4 2.3 6.9
2008 2009 2010 2011 2012 2013 2014 2015
The chart above uses EMPEA data for Russia/CIS, India, China and Brazil, with South African data collated from the survey.
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24 | SAVCA 2016 Private Equity Industry Survey 4
Investment activity
• The reported value of private equity investments made during 2015 is R10.5 billion (2014: R13.9 billion). The total number of investments increased by 33 to 534 during 2015 (2014: 501).
• The value of new investments during 2015 amounted to R6.1 billion (2014: R7.6 billion) and the value of follow-on investments during 2015 amounted to R4.4 billion (2014: R6.2 billion).
• The overall average investment deal size (new and follow-on transactions) decreased to R19.7 million during 2015, from R27.7 million for the 2014 year. The average deal size for new investments decreased to R22.3 million during 2015, from R27.4 million during 2014, while average deal size for follow-on investments decreased to R16.9 million during 2015, from R28.1 million during 2014.
• In terms of the number of reported investments, Business Partners, classified as Captives – Other, was again by far the most active investor in the South African private equity market, contributing 354 (66.3%) of the total number of reported investments made during 2015 (2014: 332; 66.3%). By value, Business Partners represents 7.6% of the cost of total investments made during 2015 (2014: 4.3%). The average deal size by Business Partners was R2.3 million in 2015 (2014: R1.9 million).
• Excluding the Business Partners investments, the average deal size of new investments during 2015 increases to R111.4 million (2014: R126.1 million) and the average deal size of follow-on investments during 2015 increases to R31.9 million (2014: R54.1 million) with the total average deal size during 2015 increasing to R54.0 million (2014: R78.4 million).
• Of the investments made during 2015 and classified into sectors by value, 15.9% were in the banks, financial services and insurance sectors, 15.7% in the retail sector, and 14.2% in the infrastructure sector.
• Infrastructure comprises 23.2% of the value of all unrealised investments at 31 December 2015, mining and natural resources accounts for 18.8% and manufacturing accounts for 15.4%.
• The cost of investments into seed and start-up/early-stage entities contributed 14.8% of cumulative unrealised investments at 31 December 2015 (2014: 14.7%). This represented 17.2% of the number of investments at 31 December 2015 (2014: 17.6%), which is indicative of the proportionally smaller transaction values for the early-stage types of deals.
• Expansion and development capital, as a proportion of investments made by cost, increased from 33.5% in 2014 to 38.8% in 2015. Replacement capital increased from 20.1% of investments made by cost during 2014 to 28.5% in 2015.
SAVCA 2016 Private Equity Industry Survey | 25
Investment activity
Figure 17 | Cost of investments made during the year, analysed by new and follow-on investments (Rbn)*
Follow-on investments 26.1 New investments 1.4
18.9
16.5
13.9 13.4 11.8 11.1 8.2 10.5
8.8 5.8 6.2 6.9 7.2 6.5 5.6 5.0 4.4 1.5 4.3 1.8 4.5 2.9 2.4 3.5 0.7 1.3 0.4 1.4
2.0 2.1 3.6 4.7 3.2 5.4 24.7 10.7 4.3 6.2 7.7 6.1 7.6 7.7 6.1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure 18 | Number of investments made during the year, analysed by new and follow-on investments
Follow-on investments New investments
834 795 806
730 723 235 651 245 627 618 581 547 261 537 540 534 227 510 501 178 265 150 229 187 151 188 174 191 222 257
534 422 403 440 503 561 599 458 468 359 363 319 389 279 277 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
* For 2008, two investments are excluded owing to a lack of information; these are the acquisition by Denham Capital of shares in SA-based energy firm, Bio Therm Energy, with a transaction value of R1.5 billion, and the acquisition of a significant shareholding in Medi-Clinic Corporation by European-based private equity fund, Lehman Brothers Merchant Bank, with a transaction value of R1.3 billion. For the 2011 year the investment by Brait (as an Independent) in Pepkor and Premier Foods for approximately R5 billion is excluded.
26 | SAVCA 2016 Private Equity Industry Survey
Investment activity
Figure 19 | Cost (Rbn) and number of investments made during the year, analysed by type of fund manager*
Independents Captives – Other (excludes Business Partners) 180 Captives – Financial Services 169 83 59 25 21 72 13.2 89 6.1 0.8 9.7 6.3 6.1 0.9 2.7
2014 2015 2014 2015 Cost of investments (Rbn) Number of investments
Figure 20 | Investments made during the year, analysed by sector (% of total cost)**
2014 2015 18.3 Banks, financial services and insurance 15.9 13.9 Retail 15.7 24.9 Infrastructure 14.2 4.9 Manufacturing 11.8 3.0 Services 5.9 0.7 Travel and leisure 5.0 0.1 Infrastructure related services 4.8 1.2 Healthcare 4.7 0.0 Real Estate 4.4 2.5 Agri and agri processing 2.3 1.3 Telecommunications 2.1 6.1 IT 1.5 4.2 Media 1.1 3.9 Mining, natural resources and related 0.9 0.3 Education 0.9 0.1 Energy and related 0.4 14.6 Other / unknown 8.4
* Excludes transactions by Business Partners ** 8.4% (R898 million) of investments made during 2015 was classified in the “other sector” category or not classified at all by survey participants (2014: 14.6%/R1.7 billion).
SAVCA 2016 Private Equity Industry Survey | 27
Investment activity
Figure 21 | Unrealised investments portfolio at 31 December, analysed by sector (% of total)
2014 2015
21.4 Infrastructure 23.2 19.4 Mining and natural resources 18.8 16.5 Manufacturing 15.4 7.0 Retail 9.1 6.9 Services 6.0 7.8 Banks, financial services and insurance 5.6 4.1 Telecommunications 4.5 0.1 Real Estate 3.4 3.5 Media 3.3 2.9 Infrastructure related services 3.3
1.9 Travel and leisure 2.6 3.6 Healthcare 1.8 1.5 IT 1.1 2.5 Agri and agri processing 0.8 0.8 Energy and related 0.8 0.1 Education 0.2
28 | SAVCA 2016 Private Equity Industry Survey
Investment activity
Figure 22 | Analysis of investments by stage based on cost of investments (% of total)
Buyout Replacement Expansion & development Start up & early-stage
Seed capital
25.9 34.8 30.9 27.5 28.5 13.9 14.4 20.1 38.8 36.6 39.9 33.6 6.7 12.9 12.8 18.8 0.1 1.8 2.0
2014 2015 2014 2015 Investments made Unrealised investments
Figure 23 | Analysis of investments by stage based on number of investments (% of total)
10.8 9.2 13.8 12.3 10.8 11.6 11.0 11.0 63.7 67.4 57.6 60.5 14.5 11.6 16.1 14.7 0.2 0.2 1.5 1.5
2014 2015 2014 2015 Investments made Unrealised investments
SAVCA 2016 Private Equity Industry Survey | 29
Investment activity
Top 10 deals in 2015
Private equity fund Investee Total Interest Sector focus company enterprise value (Rm)
Metier Private Equity Southey Holdings and Southey Mauritius 2 031 > 25% Infrastructure related services
Vantage Risk Capital Servest 1 670 < 50% General
Actis Africa Coricraft > 1 000 < 50% Retail
Ethos Private Equity Neopak 863 > 50% plus 1 share Paper and packaging
Ethos Private Equity Twinsaver 762 > 50% plus 1 share Industrials FMCG
Metier Private Equity Retailability 429 < 50% Retail
Capitalworks Robertson and Caine 411 > 50% plus 1 share Leisure
Kleoss Capital TrenStar SA 305 > 50% Mining and related services
Metier Private Equity Astrim 189 > 50% plus 1 share Healthcare
Metier Private Equity Life & Brand Co 140 > 50% plus 1 share Food services
Top 5 deals in 2014
Private equity fund Investee Total Interest Sector focus company enterprise value (Rm)
Ethos Private Equity, RTT > 2 500 42.7% Industrial transportation PIC and DPI services
Old Mutual Private Equity Tiger Automotive 1 776 38.5% Retail
Ethos Private Equity Autozone > 1 000 79.6% Consumer: aftermarket auto parts retail & wholesale
Actis Africa Tekkie Town 606 42.5% Retail
DPI Homechoice > 500 16.5% Retail
30 | SAVCA 2016 Private Equity Industry Survey www.atacapital.co.za
Ata /’ â•t•â/ (verb) : A Sepedi word meaning ‘to grow’
ta Capital (Proprietary) Limited is a Amajority black-owned and black-managed investment management company. Ata are members of the Southern African Venture Capital and Private Equity Association
Ata Capital’s primary investment focus is on non-traditional asset classes that deliver a unique proposition and superior returns to investors.
Ata Capital is rooted in the principles of innovation, excellence and social development.
Ata Capital is fund raising for Ata Fund III. All interested parties can contact us via our telephone line or visit our website (www.atacapital.co.za)
Contact us on [email protected]; (011) 321 1636; Postnet Suite 1099, Private Bag X9, 2010 Ata Capital is a member of the Southern African Venture Capital and Private Equity Association. It is authorised to provide financial services as a juristic representative under Financial Services Board licence no. 43630 (Tower Capital Management (Pty) Ltd). Analysis of BEE investment
32 | SAVCA 2016 Private Equity Industry Survey 5
Analysis of BEE investment
• BEE participation in investments is fundamental to the South African economy and remains a significant portion of private equity activity in South Africa.
• In 2015, 66.4% (2014: 60.2%) of the value of investments made were in businesses with ratings levels 1 to 4 of the DTI BEE codes. These figures are in line with the general ratings for South African companies. 2.6
Figure 26 | Value of investment by BEE recognition level 12.0 (excluding Captives - Government) (% of total)
11.0 Level 1 contributor companies 24.2 Level 2 contributor companies Level 3 contributor companies
Level 4 contributor companies 17.2 21.1 Level 5 contributor companies
Level 6 contributor companies 16.2 Level 7 contributor companies 22.3 Level 8 contributor companies 8.9 3.1 1.7 6.5 Not disclosed or non-compliant 4.1 5.3 1.8
6.7
22.0 13.3 2014 2015
7.3 6.3 Figure 27 | Number of investments by BEE recognition level during the year (% of total)
Level 1 contributor companies 17.0 Level 2 contributor companies 26.1 Level 3 contributor companies 17.5 Level 4 contributor companies Level 5 contributor companies 15.2 Level 6 contributor companies 18.0 Level 7 contributor companies 12.7 4.8 6.3 Level 8 contributor companies 3.6 2.4 6.3 Not disclosed or non-compliant 2.4 4.4
6.8
25.5 17.4 2014 2015
SAVCA 2016 Private Equity Industry Survey | 33 Exits
34 | SAVCA 2016 Private Equity Industry Survey 6
Exits
• Funds returned to investors5 during 2015 totalled R8.9 billion, compared with R11.0 billion in 2014.
• The returns to investors in 2015 had an implied times money multiple of 1.9 times, compared with the 2.3 times reported in 2014.
• The value of disposals totalled R4.5 billion during 2015, compared with R5.6 billion in 2014.
• Disposals in the form of trade sales was the most popular in value terms. By volume, the most popular method of disposal was to management.
• The average proceeds per disposal in 2015 was R50.6 million, compared with R65.1 million in 2014.
• Seventeen investments were written off during 2015, inclusive of sales for nominal amounts (2014: 28 investments). The net loss on these investments (cost less proceeds) was R33.1 million in 2015 (R557.9 million in 2014).
• The value of committed funds that were cancelled and/or which expired during 2015 was R38 million (2014: there were no committed funds that were cancelled and/or which expired).
5 Funds returned represent all cash flows returned to investors including the proceeds of an asset realisation (i.e. an exit), dividends, interest and repayment of loans. The term “disposals” refers only to proceeds from the realisation of an investment.
SAVCA 2016 Private Equity Industry Survey | 35
Exits
Figure 28 | Funds returned to investors during the year (Rbn)
Pepkor & Premier disposal (R5.2 billion) Venfin disposal (R8.8 billion)
Vodacom disposal (R16.0 billion) 5.2 Funds returned to investors
8.8
16.0
1.0 1.5 2.4 4.5 4.0 4.4 10.5 6.2 2.0 9.3 20.5 7.0 9.8 11.0 8.9 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Figure 29 | Proceeds of funds returned to investors during the year (Rbn)
3.6 3.6 During 2014 (R11.0 billion)
During 2015 (R8.9 billion)
2.4
1.8
1.3
1.0 0.9 0.8 0.8 0.7
0.3 0.3 0.2 0.2 <0.1 <0.1 <0.1 <0.1 Repayment Trade sale Sale to Share Dividends Sale of Sale to Write-offs Listing or of prefer- another buy-back and interest listed management – including IPO ence shares private by portfolio payments shares with no equity sales for / loans equity firm company involvement a nominal or financial of another amount institution financial institution
36 | SAVCA 2016 Private Equity Industry Survey
Exits
Figure 30 | Analysis of disposals made during the year based on proceeds (Rbn)
Share buy-back by portfolio company 17.2 0.8 Sale to another private equity firm or financial institution 11.3 1.9 0.3 Trade sale 2.9 Sale to management (Buy-back) Sales of listed shares and IPOs
9.1 0.1 4.0 2.9 0.4 1.7 5.6 4.9 4.8 4.8 0.9 1.4 0.5 0.9 3.6 4.5 0.3 1.6 3.1 0.8 0.8 3.2 2.7 0.9 0.2 0.2 1.3 3.4 3.1 0.1 1.8 0.1 3.1 0.4 0.2 0.2 0.3 1.6 1.3 0.1 1.6 0.3 0.3 2.0 0.7 1.0 0.6 0.3 0.3 0.3 0.5 1.5 0.6 0.5 0.2 0.5 0.8 0.8 0.5 0.5 1.0 0.8 0.1 0.3 0.3 0.4 0.7 0.1 0.1 0.1
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
During 2015 (R8.9 billion) Figure 31 | Analysis of number of disposals made during the year based on proceeds*
133 135 2 129 2 18 4 11 16 28 24 78 8 108 90 105 8 106 19 85 1 8 4 4 7 6 11 8 90 16 86 87 10 86 89 86 2 5 73 9 62 2 9 7 16 7 77 6 4 6 4 12 4 11 11 16 13 15 80 62 12 51 57 2 44 11 50 4 10 9 5 2 5 40 6 10 44 3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
* Excludes the Vodacom disposal during 2006, the Venfin disposal in 2010 and the Pepkor & Premier disposal in 2011
SAVCA 2016 Private Equity Industry Survey | 37
Exits
Figure 32 | Proceeds and cost of investments exited during 2015 (Rbn)
Proceeds (R4.5 billion) Cost (R1.7 billion)
0.1 4.5 1.7 1.8 0.8 1.3 0.3 0.8 0.3 0.3 0.3 0.2 Total Trade sale Sale to another Share buy-back Sale of listed Sales to private equity by portfolio shares & IPOs management firm or financial company (Buy-back) institution
Figure 33 | Proceeds and cost of investments exited during 2014 (Rbn)
Proceeds (R5.6 billion) Cost (R3.9 billion)
0.2 5.6 3.9 3.6 1.1 0.9 0.1 0.8 0.9 0.1 0.1 1.7 Total Sale to another Share buy-back Trade sale Sales to Sale of listed private equity by portfolio management shares & IPOs firm or financial company (Buy-back) institution
38 | SAVCA 2016 Private Equity Industry Survey
Exits
Top 5 disposals/exits during 2015
Private equity fund Investee Buyer Total enterprise Interest Sector focus company value (Rm)
Cost (R1.7 billion) Ethos Private Equity TiAuto Old Mutual and Carlyle 1 776 > 50% plus 1 share General Group
Lereko Metier Capital South Point Unemployment 1 578 > 50% plus 1 share Student accommodation Growth Fund Insurance Fund, managed by the PIC
Ethos Private Equity Plumblink Bidvest 446 > 50% plus 1 share General
Ethos Private Equity Transaction Listed on the stock 422 < 25% Financial Services Capital exchange
Vantage Capital Trenstar Kleoss Capital 161 > 50% plus 1 share Mining and related services
SAVCA 2016 Private Equity Industry Survey | 39 Performance
40 | SAVCA 2016 Private Equity Industry Survey 7 Performance
• The overriding principle of the International Private Equity and Venture Capital Valuation (IPEV) Guidelines is to show a fair valuation of investments to the investor. These guidelines were released during 2005 and adopted by the majority of global private equity associations, including SAVCA. This methodology is used as the basis for measuring the performance of private equity funds.
• Riscura, in conjunction with SAVCA, produce a quarterly South African Private Equity Performance Report. The latest reported private equity returns over different time periods are as follows:
Figure 34 | Returns over different time periods
Times money
Time Period Pooled IRR Realised Unrealised Total
10 year 18.5% 1.25 0.56 1.81
5 year 14.8% 0.89 0.52 1.41
3 year 15.2% 0.63 0.7 1.33
Figure 35 | Listed equity comparison
Compound annual growth rate (CAGR)
Year Pooled IRR ALSI TRI* FINDI TRI* SWIX TRI*
10 year 18.5% 14.1% 18.9% 14.7%
5 year 14.8% 12.9% 23.6% 14.2%
3 year 15.2% 12.2% 22.5% 12.9%
Reference: RisCura–SAVCA SA Private Equity Performance Report as at 31 December 2015
* Listed index returns are before fees; private equity returns are net of fees
SAVCA 2016 Private Equity Industry Survey | 41 Performance
Investment at latest valuation The disclosed valuation of unrealised investments in 2015 was R147.3 billion (2014: R138.7billion), with a related cost of R126.3 billion (2014: R119.8 billion).
Figure 36 | Unrealised investments at 31 December – cost compared to valuation (Rbn)
Cost 147.3 Valuation 138.7
126.3 119.8
106.5 107.4 101.3
92.1 89.6 83.9 84.4 78.3 75.7 72.7 73.0
58.5 56.5
39.3 36.4
25.1 25.1 17.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
42 | SAVCA 2016 Private Equity Industry Survey
Private equity investment professionals 8 44 | SAVCA 2016 Private Equity Industry Survey Private equity investment professionals
• The total number of investment professionals employed in the South African private equity industry totalled 489 in 2015, up from 467 in 2014.
• By the end of 2015, Black professionals accounted for 25.5% of the total (2014: 24.2%), Coloured professionals 4.7% (2014: 4.1%), Indian professionals 11.5% (2014: 10.6%) and White professionals 51.9% (2014: 55.0%). Of the total number of professionals, 6.3% were undisclosed (2014: 5.8%).
• At 31 December 2015, 21.7% of all professionals were female (2014: 19.7%).
Number of professionals 2015
Black Coloured Indian White Undisclosed Total
Male 87 15 45 209 27 383
Female 38 8 11 45 4 106
Total 125 23 56 254 31 489
Number of professionals 2014
Black Coloured Indian White Undisclosed Total
Male 80 13 40 217 25 375
Female 33 6 11 40 2 92 8 Total 113 19 51 257 27 467 SAVCA 2016 Private Equity Industry Survey | 45 Data tables 9
46 | SAVCA 2016 Private Equity Industry Survey Data tables
Year ended 31 December 2015
Total FUM at Undrawn Fund raising Investment Proceeds 31 December commitments activity activity from disposals at during the during the during 31 December year year the year
R millions R millions R millions R millions R millions
Early-stage funds
› Independents 9 540.4 1 349.5 1 226.9 98.5 8.1
› Captives (Financial Services) 0.0 0.0 0.0 0.0 0.0
› Captives (Government) 0.0 0.0 0.0 0.0 0.0
› Captives (Other) 19 119.0 300.0 0.0 0.0 0.0
28 659.4 1 649.5 1 226.9 98.5 8.1
Late-stage funds
› Independents 92 355.1 33 393.1 27 279.9 6 067.3 5 369.0
› Captives (Financial Services) 28 297.3 4 561.2 260.0 2 687.2 3 080.2
› Captives (Government) 7 486.8 0.0 0.0 0.0 0.0
› Captives (Other) 8 508.8 960.3 213.0 1 676.3 626.5
136 648.0 38 914.6 27 752.9 10 430.8 9 075.7
165 307.4 40 564.1 28 979.8 10 529.3 9 083.8
Year ended 31 December 2014
Total FUM at Undrawn Fund raising Investment Proceeds 31 December commitments activity activity from disposals at during the during the during 31 December year year the year
R millions R millions R millions R millions R millions
Early-stage funds
› Independents 5 249.7 1 073.9 657.3 237.0 264.3
› Captives (Financial Services) 330.0 0.0 0.0 15.0 0.0
› Captives (Government) 0.0 0.0 0.0 0.0 0.0
› Captives (Other) 18 343.1 0.0 0.0 0.0 0.0
23 922.8 1 073.9 657.3 252.0 264.3
Late-stage funds
› Independents 85 296.9 34 013.5 10 081.1 5 872.9 9 000.6
› Captives (Financial Services) 32 247.9 4 804.8 698.4 6 277.6 4 446.9
› Captives (Government) 0.0 0.0 0.0 0.0 0.0
› Captives (Other) 8 907.9 1 660.2 371.0 1 436.8 1 514.2
126 452.7 40 478.5 11 150.5 13 587.3 14 961.7
150 375.5 41 552.4 11 807.8 13 839.3 15 226.0
SAVCA 2016 Private Equity Industry Survey | 47 Participants10
48 | SAVCA 2016 Private Equity Industry Survey
Participants
Survey participants include the below; not all participants are disclosed owing to requests for confi dentiality.
Name Min investments Max investment Contact name Contact no. (Rm) (Rm)
4D Innovative Capital R100 000 R5 million Lungile Makhanya 021 659 2042
Abraaj Group US$5 million US$100 million Sandeep Khanna 011 884 2066
Acorn Equity R50 million R500 million Pierre Malan 021 852 2887
Actis US$80 million US$200 million/ Chantal Clark 011 778 5900 US$250 million
African Infrastructure Investment R100 million R900 million Jurie Swart 021 670 1234 Managers (South Africa)
Agis-Investments R1 million R7 million Rolf Endres 010 593 6440
Ata Capital R125 million Maredi Mampuru 011 321 1636
Bopa Moruo Private Equity Fund R25 million R80 million Nthime Khoele 011 784 1740 Managers
Business Partners R500 000 R50 million Gerrie van Biljon 011 713 6600
Capital Eye Fund Managers US$1.5 million US$20 million Dean Sparrow 011 712 1671
Capitalworks Equity Partners R100 million R500 million Garth Willis 011 301 3000
Collins Private Equity Holdings Nil R40 million Bruce Chelius 031 536 8004
Convergence Partners R5 million No maximum Yolande Tabo 011 550 5320
Development Partners International R110 million R850 million Runa Alam +44 207 349 5030
Enablis Financial Corporation SA R25 000 R5 million Ebenise Bester 021 462 4486
Ethos Private Equity Fund VI: R750 million Fund VI: R3 billion Chelsea Wilkinson 011 328 7400 and greater in consortium
Growth Capital Partners R3 million R25 million Jamie Hollins 011 513 4049
Harith General Partners US$10 million US$100 million Pule Molebeledi 011 384 4000
Horizon Equity R15 million R50 million Richard Flett 011 502 6940 10 iCubed Capital R50 000 R5 million Ismail Kajee 011 888 0027 Industrial Development R1 million Dependent on nature Christo Fourie 011 269 3000 Corporation of South Africa of transaction
SAVCA 2016 Private Equity Industry Survey | 49
Participants
Name Min investments Max investment Contact name Contact no. (Rm) (Rm)
Kleoss Capital R50 million R150 million Hale Matsipa 011 666 1660
Leaf Capital R50 million R150 million Paul Leaf-Wright 021 657 1180
Medu Capital R50 million R200 million Nhlanganiso 011 268 9140 Mkwanazi Metier R20 million R750 million Paul Botha 011 268 4000
Musa Capital Fund Managers R25 million R100 million Richard Akwei 011 771 6300
Nedbank Capital Private Equity R30 million R300 million Clive Howell 011 294 3321
Nisela Capital R50 million R300 million Richard Ngwenya 011 268 1839
Nodus Investment Managers R10 million R50 million Hillie Meyer 011 327 6907
Novare Equity Partners R77 million R387 million Derrick Roper 021 914 3944
Old Mutual Alternative Investments R75 million R2 billion Paul Boynton 021 509 6869
Pan-African Private Equity 1 Fund R20 million R120 million Zuko Kubukeli 011 883 8036 Managers Pembani Remgro Infrastructure Managers None Marcel Louw 011 290 0231
Phatisa >US$2 million 15% of fund size Stuart Bradley 011 463 1920
RH Managers R50 million R200 million Quinton Zunga 010 007 2171
RMB Private Equity, Leveraged Finance + R50 million R750 million Simon Murray 011 282 1483 RMB Ventures SA Rockwood Private Equity R250 million R1 billion Susan Rose 010 060 4153
Sampada Private Equity R10 million Nokuthula 011 318 0171 Mthombothi Sanari Capital R10 million R150 million Samantha Pokroy 011 712 1449
Sanlam Private Equity R100 million R350 million Alton Solomons 011 778 6613
Senatla Capital R20 million R40 million Owen Maubane 011 784 5929
Sphere Private Equity NA NA Aadil Carim 010 900 4200
Stanlib Asset Management US$10 million US$50 million Elizabeth Chembe 011 448 5266
Takura Capital US$3 million US$7.5 million Tafadzwa Nyamayi +263 4 707 313
Trinitas Private Equity R40 million R150 million Andrew Hall 011 994 9700
50 | SAVCA 2016 Private Equity Industry Survey SUBSCRIBE NOW
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52 | SAVCA 2016 Private Equity Industry Survey 11 Source of information
The principal source of information for this survey was the survey questionnaire. Further sources include the SAVCA 2016 Members’ Directory, discussions with private equity industry participants, and public information on private equity funds that include international surveys.
The survey questionnaire was developed by SAVCA and KPMG.
The guidelines for participation in this survey are as follows:
Participants must:
• Include investments if they are made in South Africa, regardless from where they are managed;
• Have as their principal business the management of funds (third-party and/or proprietary capital) for the provision of capital (equity or quasi equity) primarily to unlisted companies;
• Employ professionals dedicated to the management of the capital and the investments made using the capital (and capital from other providers); and
• Aim to generate returns mainly through medium to long-term returns on the sale of investments and/or social development returns.
Questionnaires were e-mailed to 110 (2014:101) funds that indicated that they would consider participating in the survey. Of these, 72 (2014: 59), representing 84 funds (2014: 76), completed the questionnaire. In addition, alternative sources were used to obtain information on a further 10 private equity fi rms, representing 18 funds, that did not complete the questionnaire.
Comparative data for 2014 can be restated by participants for errors or omissions. In addition, 2014 data is restated to accommodate changes in survey participation.
Other empirical data have been obtained from various sources, including:
• EMPEA Industry Statistics Q4 2015 – Emerging Markets Private Equity – Fundraising & Investment Analysis; EM PE Fundraising by Region & Country – Data as of 31 December 2015
• RisCura-SAVCA South African Private Equity Performance Report – Quarter ended: 31 December 2015
• Statistics South Africa
• Other sources specifi cally included in the footnotes
SAVCA reviews the document prior to its public release. SAVCA does not have access to any of the individually completed questionnaires submitted to KPMG or any other information not presented in this publication.
While care has been taken in the compilation of the survey results, SAVCA and KPMG do not guarantee the reliability of its sources nor of the results presented. Any liability is disclaimed, including incidental or consequential damage arising from errors or omissions in this report.
11 SAVCA 2016 Private Equity Industry Survey | 53 Glossary 54 | SAVCA 2016 Private Equity Industry12 Survey Glossary
BEE Black Economic Empowerment
BEE, as defi ned in the Financial Sector Charter, means the economic empowerment of all black people, including women, workers, youth, people with disabilities and people living in rural areas, through diverse but integrated socio-economic strategies.
Buy-out Leveraged and/or management buy-out or buy-in
Captive funds Funds making investments mainly on behalf of a parent or group, typically an insurance company, bank or institutional asset manager, often from an indeterminate pool of money.
Carried interest This represents a fee enhancement for a private equity fund manager, for achieving above a benchmark return or hurdle rate. The fee is often set at 20% of the value of returns achieved in excess of the benchmark return.
Development capital Funding for growth and expansion of a company
DFIs Developmental Finance Institutions
Early-stage funds Funds focused on seed capital, start-up and early-stage investments
EMPEA Emerging Markets Private Equity Association
Follow-on Investments into companies where at least one round of funding has already been investments made.
FUM Funds under management
GDP Gross Domestic Product
Independent fund Those private equity companies, managers or funds raising and disbursing capital which has been sourced mainly from third-party investors.
IPO Initial public offering; when a company’s equity is listed on an exchange
IRR Internal Rate of Return
Late-stage funds Funds focused on buyout, replacement capital and growth capital
Mezzanine debt Debt which ranks behind senior secured debt but ahead of trade credit and share- holders’ funds in terms of security. Mezzanine debt is often used in higher leveraged transactions to maximise funding availability from a company’s own balance sheet. It may provide for equity-like features such as attached share purchase warrants or participation in cash-flow.
PIC Public Investment Corporation
12 SAVCA 2016 Private Equity Industry Survey | 55 Glossary
Pooled IRR The pooled internal rate of return (IRR) aggregates or “pools” all cash flows and end-period net asset values to calculate a money-weighted return.
Replacement capital Funding for the purchase of existing shares in a company from other shareholders, whether individuals, other venture-backers or the public through the stock market. Unlike venture and development capital, the proceeds of replacement capital transactions are generally paid to the previous owners of the entity.
SAVCA The Southern African Venture Capital and Private Equity Association
Seed capital Funding for research, evaluation and development of a concept or business before the business starts trading.
Start-up and early-stage Funding for new companies being set up or for the development of those which funding have been in business for a short time.
Total funding Total funds raised by all providers of capital during a transaction. This could include the purchase consideration, funds to pay advisors fees, or funds required for immediate working capital requirements. This could be in the form of equity, shareholder loans, senior, mezzanine and junior debt and working capital facilities.
Trade sale Sale of a business to a third party.
UK United Kingdom
Undrawn commitment Capital committed to a private equity fund, but not yet drawn down for investment purposes
US United States of America
Venture capital Seed capital or capital for start-up and early stage
56 | SAVCA 2016 Private Equity Industry Survey
SOMETHING NEW Ethos extends Eazi’s reach ON THE HORIZON
STANDING OUT FROM THE CROWD Taking growth to the next level
Exceptional opportunities never simply glide across the skyline. They have to be identified, cultivated and – most importantly – actualised.
For a number of years, Ethos engaged with the management of The Eazi Group – Africa’s market leader in the rental, sale and servicing of mobile work-at-height and material handling solutions. We recognised that, in a little over a decade, Eazi’s visionary management had built a differentiated business; providing service excellence, enhanced safety and innovative cost-effective solutions for their customers.
And in the process, they established a new industry.
Crucially, we also identified that management would likely seek financial and strategic support to strengthen their business further.In a R1,6bn investment, Ethos has now acquired 65% of The Eazi Group. Buffet Investments and founding shareholders, comprising senior management, have reinvested alongside Ethos as part of the transaction. The Group—comprising Eazi Access Rentals, Eazi Sales & Services, Eazi Africa and other subsidiaries—boasts the largest and most diverse fleet of boom lifts, scissor lifts, telehandlers and vertical personnel lifts on the African continent. With customers across multiple sectors of the economy (construction, shipping, manufacturing, FMCG, transport, entertainment and mining industries), Eazi stands out as deal with unique attributes. Accordingly, the Group is well positioned to capture additional growth by increasing market penetration.
Sourcing and executing proprietary deals is paramount for long-term success in private equity. Such differentiation becomes an even greater competitive advantage in turbulent times. Ethos’ record of successful investing for over 30 years—across economic and political cycles—is testament to our proven ability to identify and elevate growth platforms.
May 2016