Historically, the volume of exits and the quality of exit routes available in Africa have been key concerns for investors looking to access African PE. Most LPs and GPs in AVCA’s 2021 African Private Equity Industry Survey cited limited exit opportunities as a critical challenge for private equity fund managers in Africa over the next three years. Furthermore, AVCA’s survey, Volatility and Uncertainty: How Private Equity in Africa Navigates Through Turbulent Times, found that approximately half of the respondents had to amend their exit plans because of political or currency risk in their investment geographies.
Exit data published to date in Africa does not specify the US dollar amount of exits achieved, but it shows the number of exits. According to AVCA, African PE had an average holding period of 6.4 years between 2010 and 2021, with the holding period reaching its maximum at eight years in 2020.
Trade buyers remain the most popular African private equity exit route. Trade buyers represent existing businesses wishing to synergise the PE company with their current operations. This is followed by exiting through other PE and financial buyers, with the third most popular exit being management buyouts (MBOs). IPOs represent the least popular exit route on the continent, mainly because of the illiquidity that characterises African stock exchanges.
Exit activity reached record highs in 2015 with 56 exits. Subsequently, the volume of exits reported in Africa dropped to an average of 47 per year between 2016 and 2019. More recently, 2020 yielded 33 exits. During the six months ended June 2021, 16 exits occurred. AVCA further noted that lower exit activity is mainly due to a decrease in exits recorded in South Africa, given a backdrop of heightened macroeconomic uncertainty in the country. In 2020, the number of exits reported on the continent decreased significantly to 33. This reflects the economic implications of the Covid-19 pandemic and the fact that GPs prioritised portfolio management to protect their investments.
Since 2010, financials have consistently been one of the main sectors of investment, representing on average a quarter of all African exit activity. The industrials sector followed closely behind.