Covid-19 is making a real impact on the liquidity of many organisations across South Africa, which has affected everything from logistics to paying salaries. However, with this comes the opportunity for these businesses to engage in a conversation with Private Equity firms to consider capital investment.A number of organisations have had setbacks due to a supply chain being disrupted, with this heavily impacting services to clients. It has meant that there could be opportunities to secure a strong and profitable supply chain partnership through PE. Where consolidation opportunities exist in certain industries, private equity investors can add significant value in assisting their investee companies to execute mergers and acquisitions.
Tshego Sefolo, CEO: Agile Capital explains that a private equity firm looks at business from different perspectives – that of the external observer.
“It’s worth noting that companies with scale and diversification are more resilient during challenging times,” says Sefolo. “We view ourselves as strategic investors open to long term partnerships, particularly appreciating the current economy.
“We are more attracted to established businesses. Sectors like the service industry, manufacturing along with communications present compelling investment cases. We’ve also seen the demand for healthcare services and pharmaceuticals increase during the outbreak, accelerating the growth of healthcare sector.”
With economic recovery set to be an extended process, it may be an opportunity for larger businesses to divest of some of the non-core assets from their businesses. This allows for excellent opportunities for the management teams of these businesses to partner with a reputable PE investor to create solid stand-alone businesses. Agile Capital is a financial investor and is not operational, but rather, backs strong management teams and is there as a strategic partner.
Liz Kolobe, principal dealmaker at Agile Capital, says: “This means that teams need to align from the very beginning in order to create the right platform from which the business can grow – and steer it towards long-term success.” The partner concerned should have a keen interest in the business and be able to make recommendations regarding optimal funding structures, future funding requirements and corporate governance.
“Our partnerships are long-term, and Agile actively looks to enter into durable partnerships, drawing on our experience to bring value to our investments,” says Sefolo. “We are able to offer much-needed liquidity, but also access to our skills and expertise as an additional benefit.” We are quite risk averse explains Kolobe, and when investing we expect to see a slower but steadier growth.
As a key local PE player, Agile Capital recognises and supports Black Economic Empowerment as an imperative. Considering the very real social pressures in the country at present, superior returns can only be generated through a disciplined approach to investing that builds sustainable businesses and embraces transformation and the empowerment of others.
The firm is currently managing an existing portfolio while looking for investment opportunities.
