African private equity firms cashed in on investments last year at the highest rate in almost a decade, with South Africa, Egypt, Nigeria and Kenya accounting for two-thirds of these exits.
Equity firms sold investments in 44 companies in 2015, compared to 39 companies in the two previous year, according to a report by Ernst & Young (EY) and the African Private Equity and Venture Capital Association (AVCA).
The number of successful private equity exits influences a company’s ability to attract investors and raise funds.
Private equity firms in Africa still continue to outperform public markets, the report showed.
The financial services sector capped the highest exits at 24 percent between 2014 and 2015, while the oil and gas sector saw no exits during the same period, the report showed.
One of those institutions is Nigeria’s Access Bank, which obtained approval to raise up to 100 billion naira ($503.65 million) from either private or public funders on Thursday.
“The biggest current challenges noted by PE firms included an increasingly tough macro-economic environment, particularly currency fluctuations, valuations trending upwards, and an intermediary landscape that is underdeveloped in a number of countries,” EY said in a statement.
Returns per region varied, with East Africa performing the best, closely followed by Southern Africa (excluding South Africa) and North Africa, the report noted.
Geographic expansion, cost reduction, mergers & acquisitions, and new management were some of the factors contributing to the growth.
AVCA analysts were still cautious about the growth of the market, saying that the year ahead will still be challenging.
($1 = 198.5500 naira)