Private equity zooming in on African opportunities

Private equity companies are zooming in on opportunities in Africa and actively recruiting on the Continent, experts say.

In the first five months of this year private equity firms raised $2.8bn in Africa-focused funds, 80% of the total raised in all of 2009, says specialist data provider Preqin. Prospects for the rest of 2010 as just as positive: buyouts worth $413bn have been announced in the first half of this year, according to Dealogic, close to the total achieved in 2009.

"As head of the sub-Saharan financial services practice at Heidrick & Struggles I most certainly have noticed an increase in private equity activity across the continent and an increasing interest in investing in Africa by international players," says Veronique Parkin, senior partner in the executive-level specialist recruiter's Johannesburg office.

"Last year we appointed a head of West Africa based in Lagos for a well respected emerging market focused private equity business and several international private equity players are now looking at having a Johannesburg as well as West African (usually Lagos- based) presence on the ground. There is certainly increased activity and recruiting."

Some of the world's biggest buyout firms are expressing optimism about Africa's potential and increasing their presence on the continent.

"I am very bullish on the prospects for Africa," says David Rubenstein, managing director of the Carlyle Group. "Nothing compares with Africa in terms of economic growth over the next decade." The opportunities make it worth facing the risks, which include volatility, scarce availability of financing, less management depth and fewer opportunities to sell businesses.

Private equity companies are interested in resources, as commodity prices and demand keep growing, but also in telecommunications, financial services and consumer goods and retail, as Africa's huge population is generally underserviced in these last two areas.

"We have recently been retained by a large international alternative investment business to assist them in boosting their deal origination and execution capability in resources in Africa," says Parkin.

"There are more specialised infrastructure and agriculture players as these also offer growth prospects on the Continent. Substantial funds have been raised globally to invest in Africa and these now need to be invested and we are assisting in identifying executives to achieve this. There is also a demand for operating partners in private equity firms to ensure that the required value is created out of the African portfolio companies."