August 30, 2013
Interviewed by: David Snow
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Sandile Hlophe on EY & AVCA’s African Exits Report

Sandile Hlophe of EY discusses the findings of Harvesting Growth. The recent report by EY and AVCA details the state of exits across the continent with an emphasis on the value-add of ESG during the growth-creation process.

Sandile Hlophe of EY discusses the findings of Harvesting Growth. The recent report by EY and AVCA details the state of exits across the continent with an emphasis on the value-add of ESG during the growth-creation process.

Expert Q&A with Sandile Hlophe: EY &  AVCA’s African Exits Report

What are the key findings of the report on the African private equity and venture capital landscape?

Sandile Hlophe, EY:  Our latest study in exits, we called it ‘Harvesting Growth’ and really, to use the analogy in terms of for you to harvest any growth, you need to invest, put a bit of effort, fertilizer and growing and watering that seed. So some of the key insights that our study shows, was that all the exits in Africa happened to be to strategic buyers, more special regional strategics and then number two, the value-add of ESG is always very important because a lot of the companies are doing investment in environmental source a lot of governments issues particularly gave better returns in terms of those exits and some of those models were even better than what they had JAC index would deliver from a return over a five-year period.

What did the report discover regarding PE exit activity and regional performance in Africa?

Hlophe:  We looked at five year period between 2007 and 2012 because typically, we find most PE firms have an investment horizon of between 5-7 years and in the beginning, we thought that the exits would be centered in the mature market of South Africa but interestingly, there is a very good spread, so we came in with a total of 118 exits over a 5-year period that we identified and we studied 62 of those, and all 62 have got a very good spread between east, west and southern Africa so there’s been a good multitude in spread and different sizes from between north to 20 million U.S. between 20 to 50 and above.

How does your firm provide tailored services to private equity investors in Africa?

Hlophe:  So we work hard with private equity and primarily our services are broken down really into three categories. The first one would be around the pre-exits, so working with private equity companies in our system and identify potential good targets and assisting with having those initial discussions around looking at the business, what’s the best entry model and where do you source that exit from, that buy from? Number two, during the investment period, we do quite a lot in supporting the private equity firm in creating a lot of that value, in terms of assisting and deferring, typically they need to change their CFO and network of various service providers and also connecting our other businesses and most likely in the exit. Part of that work is in helping management in the PE firm prepare the company for an exit in terms of saying what is the exit strategy, who are they going to target and how do you actually dress up the bride and actually prepare it for the exit?

 

 

 

 

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