Sub-Saharan Africa Generates Strongest Private Equity Trend in EMEA, says S&P Capital IQ
PE firms in EMEA allocate €748.7mn to SSA region in January to April 2014
London - June 25, 2014 -Increased inflows to Sub-Saharan Africa (SSA) is one of the strongest trends emerging in the Europe, Middle East and Africa (EMEA) private equity (PE) market so far in 2014, highlights S&P Capital IQ in a new report.
In its quarterly EMEA Private Equity Market Snapshot, S&P Capital IQ reveals that private equity firms located in the EMEA region allocated €748.7mn to SSA in January to April this year, which was an increase of 803.1% compared to the capital deployed in the same period last year, reflecting a 41% rise in deals to 41.
As a destination for PE firms globally, SSA activity increased by 38% in terms of deal counts and 262% in terms of invested capital (€806mn) compared to January-April 2013, according to S&P Capital IQ data.
"The drivers behind the growth in private equity activity in the SSA region have been numerous and complex," commented Silvina Aldeco-Martinez, Managing Director at S&P Capital IQ. Sub-Saharan Africa appears to be rapidly moving from an agrarian to a consumer and service based economy, largely due to its rapidly expanding middle class. Furthermore, the region has reduced its reliance on exports to Europe and other developed markets, and increased its exposure to higher growth Asian economies*. "The private equity market, in particular, is well-placed to capitalise on growth within the region due to its longer term investment horizon and ability to cope with some volatility in the growth trajectory," continued Silvina Aldeco-Martinez.
However, according to S&P Capital IQ, two of the key barriers to further private equity investment in the SSA region are its lack of developed equity markets for IPOs, and the restricted availability of leverage in comparison to more developed regions within EMEA, such as Europe.
Overall, the report says the deployment of PE capital in EMEA reached healthy levels in the first four months of 2014 despite a hiccup in April. General partners in EMEA deployed a significantly higher amount of capital from January to March compared with the same period last year. However, deal volume in April was only €4.2bn versus €9.5bn in April 2013, and the aggregate for new entry deals was €23.2bn, or 4.5% lower than the same period last year.
In each edition of EMEA Private Equity Market Snapshot, S&P Capital IQ provides in-depth analysis of the market and highlights some of the latest emerging trends. In the appendix of each issue is a data pack which provides a top-down view of the market compared to its position at the same point in time last year. Included in the data pack are charts showing transaction numbers and volumes among EMEA-based PE and venture capital (VC) targets, transaction volumes and deal counts undertaken by EMEA-based PE firms and VCs, and sector-level multiples for private equity and the region's broader merger and acquisition market.
*Source: Standard & Poor's Ratings Services Webcast: An Update on Sub-Saharan Africa Sovereign Ratings, 7 May 2014. Available at: http://ratingsevents.standardandpoors.com/content/US_SV_Event_WebcastAfrica5714
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