Despite the flux in many African markets over the past few years, the number of PE-backed IPOs in both African and global stock exchanges has remained relatively constant. Over the 2010-2017 period, PE-backed IPOs generated over USD3 billion, contributing 16 per cent in terms of volume and 23 per cent in terms of value to total IPOs.
That’s according to the African Private Equity and Venture Capital Association’s (AVCA) first report, in conjunction with PwC, analysing IPOs of African Private Equity (PE) portfolio companies on African and international stock exchanges.
The report, which focuses on initial listings between 2010-2017, reveals that the Johannesburg Stock Exchange remains the most attractive exit destination for PE-backed IPOs, in terms of value and volume, with nine IPOs worth USD1,869 million in that period. Outside Africa, the London Stock Exchange remains the preferred destination for PE exits from African portfolio companies, with the second largest IPO proceeds of USD600 million.
The study also reveals the low free float of PE-backed IPOs, suggesting PE firms tend to progressively exit their investments. In terms of performance, Sub-Saharan Africa PE-backed IPOs outperformed their North African counterparts over a one-year time horizon, with an average increase from offer price of 27 per cent compared to 0 per cent. This may be due to economic impacts and macro volatility over the period considered in the study.
Ziad Oueslati, Vice Chair, AVCA & Co-Founder and Managing Director, AfricInvest, says: “The consistency of PE backed IPO exits in Africa is welcome news, despite the challenges emerging markets have faced over the past few years. Further developing an enabling environment that encourages investors’ commitment, is key to driving more African PE exits on both African and international stock exchanges.
Enitan Obasanjo-Adeleye, Director, Head of Research, AVCA, adds: “IPOs are rarely used for African PE exits, with investments more often being exited via trade sales and through transactions to other financial buyers. This can be attributed to fragmented regulation, political uncertainty and capital markets that need to be further developed. AVCA supports regulatory development to encourage IPOs for PE backed companies in Africa, notably the Kenyan Capital Markets Authority’s recent initiatives.”
