DealMakers - Q3 2023 (released November 2023)
Unlocking private equity exits in the face of increasing SA uncertainty
by Thabo Ndimande and Hauke Schotola | RMB
Despite the economic and political challenges in South Africa, multinational companies and investors with long-term capital continue to drive investments across various industries, particularly those with strong growth prospects, led by entrepreneurial management teams and attractive competitive positioning.
RMB is assisting a number of private equity clients to exit their investments in various sectors in South Africa, a trend expected to continue into 2024. For instance, in the last 18 months, private equity clients have been helped to achieve some of the largest PE exits in the SA market, with excellent outcomes for the sellers.
This includes the sale of EnviroServ Holdings to a consortium made up of French multinational SUEZ, Royal Bafokeng Holdings and African Infrastructure Investment Managers, and the sale of Amrod by Alterra Capital Partners to Oppenheimer Partners. The acquisition of EnviroServ will enable SUEZ to reinforce its positioning as an international leader in industrial and municipal waste treatment activities, and to strengthen its position on the African continent.
Multinational companies continue to evaluate investment opportunities in sub-Saharan Africa, but have become more selective in exploring acquisition opportunities in this region, especially when compared with targets in other emerging markets. Longer-term investment horizons and an entrepreneurial background are some of the key attractive characteristics that investors with access to capital are looking for. In addition, existing management teams (and founders) that are expected to remain invested (to some degree) and drive the future growth of these businesses are appealing. RMB continues to expect healthy transaction activity in the next twelve months as we head into the uncertainty of the outcome of the 2024 general election.
Another interesting development is the growing interest in industries which, on the surface, aren’t immediately attractive, but where one can find businesses that are thriving despite economic malaise. Resilient financial performance and strong opportunities for further growth make specific companies in these niche sectors attractive investments, which supports the case for more of a bottom-up vs top-down approach to investing.
Volatile market conditions make it particularly important to have the right tools and understanding of a business and its operating context to generate and sustain interest with potential buyers, thereby driving successful exits.
Clients on the sell side have to make critical judgement calls in selling businesses, and need experienced teams to help them navigate through cycles and a challenging market.
Ndimande and Schotola are Lead Transactors in Corporate Finance | RMB.