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Private equity take the stage

Marlow Capital, Vantage Capital Group and Actis caught attention in the M&A space.

Speak to most advisers in the M&A industry and they will tell you that private equity is currently the most active space. This week saw the announcement of three PE deals – two with local companies and the third in Ghana.

The term ‘private equity’ refers to shareholder capital invested in private companies, as distinguished from publicly listed companies. Investments by private equity funds into companies hold great benefits besides the mere cash effect to develop businesses. Private equity investments have considerable impact in terms of productivity, skills development and job creation, as it includes not only the transfer and exchange of know-how but also the flow of capital. In addition these fund managers play an active role in managing their investments in companies as they derive a return from the increased valuation of their investments and not just debt repayment and an associated interest rate.

The announcement by Actis, the global pan-emerging market private equity investor, of a 42,5% stake in Tekkie Town for $65 million (R715 million) represents the second largest local PE transaction this year after AngloGold’s sale of its Namibian Navachab gold mine in February to little–known PE company QKR Corporation for $110 million. Founded in 2001, Tekkie Town is a leading local independent sports and lifestyle shoe retailer and currently has over 265 stores across the country, ten stores in Namibia and one in Lesotho.

Actis, which has had a presence in South Africa for many years, will provide the R1.5 billion company with the capital and expertise needed for continent-wide expansion. David Cooke, director of Actis who will join the Tekki Town Board, believes that investments such as this one is all about partnerships, not just about buying a business from its founders but rather taking the business to the next stage of growth. Actis has a strong track record in the consumer-focussed sector both locally and on the continent having invested $1.6 billion in the sector to date.

Vantage Capital Group, a local black investment and financial services group, was launched in 2001 after a merger with MMR Equity Capital with the purpose of establishing a Venture Capital Technology Fund. This week the group announced that through its Vantage Fund II, it had concluded a transaction with Ghanaian Surfline Communications. The $30 million (R330 million) in capital advanced will fund the on-going expansion of Surfline’s 4G LTE network and help grow its product distribution and marketing network.

Established in 2011 to provide premium quality wireless broadband connectivity to the Ghanaian market, the company was awarded a Broadband Wireless Access licence in the same year by the National Communications Authority. Under the terms of the license Surfline must provide coverage to at least 50% of the country within five years, although the company intends to expedite that request to meet the growing data demands of those in rural areas.

The network’s successful commercial launch in August has seen exponential growth in its customer base in both the consumer and corporate segments. What the company’s 4G LTE network allows is for it to offer, at competitive rates, high-speed internet connectivity up to 10 times faster than the average speeds offered by the existing mobile network operations.

This is Vantage‘s third investment outside of South Africa and its second in Ghana after the $18.5 million commitment to Genser Energy in June last year. Currently Vantage has over $450 million (R4.95bn) funds under management.

Marlow Capital announced this week that it had taken an undisclosed stake in Mailwise International, a Benoni based firm focused on bulk mail logistic solutions, handling both outbound and inbound mailing services. Mailwise CEO Shaun Westmorland has run the company (once in the Servest stable) for the past 20 years.

The company has been successful, achieving a national footprint and a presence in the UK and Europe but has reached a point where further growth is being constrained by lack of capital and skills to take the company to the next level says Marlow Capital’s Sean Meyersfeld. Marlow as a financial partner will seek to improve operational efficiencies across the business, grow the product range and services and expand the company geographically, extending its footprint across Africa and growing it into a leading international logistics player.

According to the KPMG and SAVCA Venture Capital and Private Equity Industry Performance Survey, released in June, the growing investor appetite for private equity saw the asset class expand by 17% last year to reach R162.2 billion in funds under management, thanks to successful fund raising programmes.

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