Kenya leads East Africa in attracting private equity investors

Kenya has in the last seven years dominated the equity industry in East Africa taking up 63 per cent share of the market.

According to the Private Equity Industry Survey for East Africa for between 2007 and 2014 by audit firm KPMG, Kenya leads countries in the region in attracting private equity seekers mostly from Europe and North America, the major sources of such capital globally.

Five sectors attracted the largest interest in the region. These are agriculture 27 per cent, financial services 14 per cent, fast-moving consumer goods 11 per cent, ICT 10 per cent and healthcare, nine per cent.

Investors in agriculture were in the upstream of the value chain mainly in processing of milk and horticulture.

“Of the total 79 deals, 70 were within the range of $10 million or less and 61 deals were for a minority equity stake of 40 per cent and below,” said Ms Sheel Gill, the deal advisory KPMG East Africa.

ATTRACTIVE DESTINATION

In Kenya, agriculture attracted seven deals, financial services nine, fast moving consumer goods four, ICT eight, retail six, manufacturing five, healthcare two, education four while transport and logistics got two.

High equity stakes were noted across fewer sectors. Two out of three deals in the $10 million to $50 million category was for an equity stake of over 30 per cent across five sectors that included financial services, fast-moving consumer goods, agriculture, manufacturing and renewable energy.

However, four deals with equity stakes greater than 51 per cent in financial services, fast-moving consumer goods, retail transport and logistics and education sectors were dominant.

The total number of exits over the seven-year period to 2014 were 21 and were worth $260 million.

with the most preferred method of exit being share buy-back at 52 per cent and only three exist had a multiple of more than three.

The survey notes that the number of exits have been increasing since 2011 with 7 reported in 2014. Financial services investment, the survey notes seem to be the most marketable for the private equity sector, with 43 per cent total exits being in this sector.

“The exits since 2012 appear to have been invested before 2007, implying a holding period of more than five years,” she said.

Most of the funds came from development financial institutions 13 per cent, high-net worth individuals 11 per cent, endowments, insurance, pension funds and sovereign funds 3 per cent each and others 4 per cent.