By sector

Historically, the range of EV/EBITDA multiples across sectors and company sizes is relatively small. While there is notable activity across most sectors in Africa, value is achieved by understanding the fundamentals within the industry and the context of the macroeconomic environment.

Information Technology and Consumer Discretionary remain the two sectors with the highest investment activity similar to the 2018 China Mainland outbound activity. Globally, the Technology sector, including Fintech, was active in 2018, with the USD 14bn funding round by Ant Financial being the largest ever private fundraising (Source: PwC, 2018). In China, internet and technology deals are wildly overpriced compared with other sectors; at 31x EBITDA, median deal multiples for Chinese internet and tech companies are twice as high as those for other industries in Greater China (Source: Bain & Company, 2019). The highest EV/EBITDA multiples were historically seen in the consumer discretionary (7.0x) and consumer staples (6.39x) sectors, which promise high growth due to African demographics.

There was a transition in the Energy sector from larger, lower multiple deals to smaller, higher multiple deals. The current EV/EBITDA multiple of 7.3x is a 48% increase from the prior three years’ average of 4.94x. An increase in investment in earlier-stage energy companies in industries such as gas distribution has resulted in higher EV/EBITDA multiples.

Industrials remains another popular sector for investment, including the construction, engineering, transport, logistics, equipment, and machinery industries. Investment is mostly in the light industrial sector with a focus on import substitution. The EV/EBITDA multiple of 5.21x has slightly decreased by 3% year-on-year, although 8% in transaction activity was experienced.

The Telecommunication sector has experienced a 58% decrease in transaction activity in 2018. However, a year-on-year increase of 6% in the EV/EBITDA multiple was experienced (5.71x in 2018). Most 2018 deals in this sector were focused on alternative carrier and wireless telecommunication services companies.