Private equity

Pricing in Africa

Many of the drivers of price changes are unobservable, so it is often difficult to interpret changes over time. However, the same factors that influence any investment’s price also influence private equity market prices, as noted in this research's introduction.

Historically, higher-priced transactions tended to take place at the larger end of the spectrum. However, a shift has been noted for African ex. SA companies, whereby regardless of the price range, the median EV/EBITDA multiples ranged from 7.9x to 8.7x. For South African companies, the median EV/EBITDA multiple of 4.7x for small transactions (smaller than USD 25m) is also seen in larger transactions (greater than USD 250m), which was priced at 4.5x for the July 2017 to June 2020 period, representing a 39% reduction in the median EV/EBITDA multiple from July 2011 to June 2014.

Although smaller transactions in South Africa have maintained a relatively consistent median EV/EBITDA multiple across the periods, the median EV/EBITDA multiple for transactions occurring between the USD 25m – USD100m price range has more than doubled from June 2012 to June 2020.

South Africa’s macro-economic headwinds may have made larger companies that are broadly exposed to the South Africa economy less attractive than smaller niche firms that can operate in more niche areas.