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Webber Wentzel’s Michael Denenga on the latest trends in the private equity space
2018 was an eventful year for private equity Africa. We saw the fall of the Abraaj which was the largest buyout fund in the Middle East and North Africa collapse due to a row with investors. This suggests that in 2019 they will be significant changes in the private equity industry with emphasis on stakeholder strategies. Michael Denenga, Partner at Webber Wentzel and a specialist in Private Equity and fund formation.
Mon, 04 Mar 2019 10:36:51 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The trend of fund managers seeking to extend fund terms in response to challenges in exiting investments and unmet return expectations.
- The discussion around hurdle rates and the minimum return expectations for investors, and its impact on negotiations between fund managers and investors.
- The emphasis on transparency, governance, and stakeholder alignment in private equity firms as a response to the collapse of Abraaj and increasing investor demands for oversight and reporting.
The private equity landscape in Africa has seen significant shifts and challenges in recent times, particularly highlighted by the downfall of Abraaj, the largest buyout fund in the Middle East and North Africa. The collapse of Abraaj due to disputes with investors has raised questions about transparency, governance, and stakeholder strategies in the private equity industry. In a recent interview on CNBC Africa, Michael Denenga, Partner at Webber Wentzel and a specialist in Private Equity and fund formation, shed light on the trends and issues shaping the private equity space in Africa. Denenga pointed out that one of the key trends in 2018 and moving into 2019 is the growing number of fund managers seeking to extend fund terms. This trend has been driven by challenges in exiting investments as well as unmet return expectations. As a result, fund managers are engaging in negotiations with investors to extend fund terms, with investors increasingly demanding penalties or additional thresholds for approval. The discussion around hurdle rates, which determine the minimum return expectations for investors, has also been a focal point in these negotiations. Denenga highlighted the importance of transparency and governance in private equity firms, emphasizing the need for clearer reporting practices and access to audited financial statements. He noted that investors are now requesting more information and oversight, including forensic audit reports and access to fund administrators. While some have called for stricter measures such as the adoption of global investment performance standards (GIPs) to regulate private equity firms, Denenga argued that the industry already has existing checks and balances through industry associations and investor guidelines. He explained that regulation and governance in private equity are often negotiated through limited partnership agreements, ensuring that the industry maintains control and compliance. Reflecting on the history of Abraaj and its rise during the era of easy money and high yields, Denenga acknowledged the challenges facing emerging markets in the current economic environment. However, he remained optimistic about the future of private equity in Africa, suggesting that collaboration between various stakeholders and tighter documentation will ultimately rebuild investor confidence. As the industry navigates these challenges, Denenga stressed the importance of adapting to the changing landscape and maintaining a focus on transparency, governance, and stakeholder alignment.
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