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Regional fund and transaction size

In regions where the capital markets and private equity industry are more developed, companies and transactions are larger, supporting bigger funds. As a result, Southern African and Pan African funds continue to have the largest portion of funds over USD 200m. The management costs of a fund with continent-wide presence are much greater than a fund with regional focus. Therefore, almost all Pan African funds need to have commitments greater than USD 200m. Due to their size, Pan African funds focus on larger transaction sizes than regional funds, leaving them to compete in very different markets.

Smaller funds are more common in less developed parts of the continent, such as East Africa. Compared to 2015, Southern Africa has a smaller proportion of funds greater than USD 200m and a greater proportion in the smaller fund size buckets. This may be indicative of greater fundraising in Southern Africa excl. South Africa. The move to larger funds in East Africa is evidence of the growth and interest that currently exists in the region. This indicates that Africa’s private equity industry is growing and becoming more diversified.

When considering transaction sizes, it appears that investment focus has shifted over 2016 in the East African and West African markets. East African funds’ move towards targeting small and medium enterprises has resulted in a greater focus in the USD 6m to USD 10m size bucket. In West Africa, the market appears to be most active at the bottom and top of the range in terms of transaction size. This may well be a result of a combination of larger transactions by Pan African funds and smaller transactions by regional funds.

 

Next: Africa’s private equity geographic focus