Africa-focused private equity firm raises $900 million

Africa-focused private equity firm Development Partners International has raised $ 900 million in its third round of funding, closing a deal that will give a major boost to an investment ecosystem hard hit by Covid-19.

DPI’s African Development Partners III Fund exceeded its target of $ 800 million and has raised an additional $ 250 million to co-invest in specific companies.

Runa Alam, co-founder and CEO of DPI, said the fundraiser showed investors recognized that money could be made on the continent on investments that also had a social impact.

“Our strategy is to invest in companies that benefit from an emerging middle class,” he said, arguing that around 300 million of Africa’s 1.3 billion people met this broad definition.

While he acknowledged that the economic aftershocks of the pandemic had almost certainly affected the incomes of the middle class in Africa, rapid digitization meant that companies were finding new ways to connect with consumers. Some were offering “value” propositions for the underprivileged, he said.

“We have not seen a drop in the growth of our companies,” he said, referring to revenues in companies ranging from a pan-African manufacturer of generic drugs to a Nigerian fast food chain and a private university in West Africa that offers distance education. .

Abi Mustapha-Maduakor, Executive Director of the African Private Equity and Venture Capital Association (AVCA), said: “It’s really great to see when the big fund managers can close down. There are opportunities, particularly in technology-enabled companies. “

He admitted that the industry had been struggling to raise fresh money in a tough economic environment and at a time when face-to-face meetings between potential investors and startups had been difficult.

Private equity funds investing in Africa raised $ 1.2 billion in 2020, up from $ 3.9 billion in 2019, according to AVCA. Its report for the first half of 2021, to be released this week, will show a fairly flat start to the year with about $ 500 million in final closings.

KKR other Carlyle, which once had big plans for Africa, have shrunk, citing the small number of investment opportunities of the right size.

Souleymane Ba, a partner at Helios Investments, which has invested $ 4 billion in African companies since 2004, said: “The market is active but you have to be very specialized and very few general partners in Africa have the experience and the track record.”

Hendrik du Toit, CEO of Ninety One, an Anglo-South African asset manager, said that investor interest in Africa was limited. “Sadly, the majority of African policy makers have failed to live up to the promising ‘Africa on the Rise’ narrative that was spread 10-15 years ago,” he said.

Alam said that this opinion was too negative. None of the 23 companies that DPI had invested in for 14 years had failed and DPI had always performed in the top quartile, he said.

“We give good returns in dollars,” he added. “Despite all the pessimism and ruin over Africa, our macro thesis still stands. There are 1.3 billion people, the youngest demographic in the world, which means that while other regions will have fewer people, Africa is still growing. It is a continent that cannot be ignored. ”

The $ 900 million invested in the DPI fund came from pension and sovereign wealth funds, development finance institutions, insurance companies, asset managers, and impact investors, with roughly half from Europe, one-third from the US. And the rest of the Middle East and Africa. .

In addition to existing investors in DPI, which has $ 2.8 billion in assets under management, some 25 new limited partners (LPs) had invested at least $ 5 million each, Alam said.

Previous DPI investments include Eaton Towers, an African telecommunications mast company that was sold to American Towers for $ 1.85 billion, and Mansard, a Nigerian insurer, which was bought by Axa.

Source: Insider Voice (Published on October 3, 2021)

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