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Investing in quality assets

Anna Lyudvig
Nov. 19, 2020, 5:14 p.m.
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Word count: 1026

In October, Vantage Capital, Africa’s largest mezzanine fund manager, made a $28m equity investment to acquire a significant minority shareholding in the Cliniques Internationales du Maroc Group (CIM Santé Group). For Vantage, this was the largest growth-capital investment to date. AGF’s Anna Lyudvig speaks with Luc Albinski (pictured), Managing Partner, and Driss Benabdeslam, Associate Partner at Vantage Capital, to discuss details.

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In October, Vantage Capital, Africa’s largest mezzanine fund manager, made a $28m equity investment to acquire a significant minority shareholding in the Cliniques Internationales du Maroc Group (CIM Santé Group). For Vantage, this was the largest growth-capital investment to date. AGF’s Anna Lyudvig speaks with Luc Albinski (pictured), Managing Partner, and Driss Benabdeslam, Associate Partner at Vantage Capital, to discuss details.

Anna Lyudvig (AL): Can you please tell us about your typical deal size and why have you decided to increase it?

Luc Albinski (LA) & Driss Benabdeslam (DB): Vantage’s deal size ranges between $5-25m even if our sweet spot is more around $10-15m. As a fund manager, we always have to tackle two issues: (i) fund deployment during the investment period, i.e. make sure to invest all investors’ commitments in quality deals; and (ii) diversification of the portfolio, i.e. avoiding exposing the fund to a small number of assets/sectors/countries to mitigate the risk for investors.

Regarding CIM Santé Group, we decided to increase the ticket for several reasons:

(i)   CIM is a quality asset in a sector we wanted to invest in, healthcare. CIM Santé is one of the leading private healthcare groups with a founding family with a solid reputation in the market. As a pioneer in interventional cardiology and as an active leader of the National Union of Cardiologists, the Chaara family has created a strong medical network, not just in cardiology, with deep connections to the star physicians that a successful clinic needs. This is in stark contrast to the unsuccessful efforts of other groups that have failed to garner the support of a critical mass of top doctors.

(ii)    Morocco is one the rare investment grade countries in Africa with a sound politic and macro-economic environment: we were therefore happy to increase our exposure to this country.

(iii)    Returns expected on CIM Santé should allow to boost the overall returns of the Fund as the CIM Group is well positioned in its various markets:

a) CIM Marrakech dominates the market and is one of the most renowned cardiology clinics in the Kingdom. This is a real success with almost 100% occupancy in 2019. Once the extension of Marrakech is operational, CIM Marrakech will strengthen its position as a leader in cardiology but will also expand its share of other medical specialties as the first multidisciplinary clinic in Marrakech and in the southern region of Morocco.

b) CIM Tangier will benefit from the limited competition due to the limited number of low capacity and aging clinics in Tangier. CIM Tanger, with its sophisticated offering of international standards, will dominate the market in the northern region of the Kingdom.

c) CIM Casablanca will compete with a handful of clinics of comparable size in a large and rich market. CIM Casablanca will differentiate itself from the existing offering by having the complete value offering which will include a prime location, state of the art equipment, excellence in cardiology and other specialties and the largest real estate footprint and capacity in the private sector.

(iv)  Sponsors were looking for a funder who is able to cover all the program of capex that is needed for the opening of new clinics.

AL: Have you previously done any deals in Morocco? What's your view on the country's private equity and private debt markets?

LA & DB: Yes, we invested €8.0m in Equity Invest in October 2019. Equity Invest is a holding company with several assets in the IT / technology sector in Morocco.

Considering Private Equity, Morocco’s is one of the most dynamic market in Africa and represents the lion share of private equity deal flow in French-speaking African countries.

Private Debt in Morocco, on the other hand, is still in an embryonic stage: the large part of actors (banks and DFIs) invest mainly in senior debt, the mezzanine segment is still under covered.

AL: What's your experience of investing in the healthcare sector? 

LA & DB: CIM Santé is our first investment in the healthcare sector. We invested in the past in correlated sector like pharma: e.g. Austell in South Africa.

AL: Given the ongoing Covid-19 pandemic, do you consider any other healthcare-related investments?

LA & DB: Vantage is a generalist fund, which means we are sector agnostic. If you look at our portfolio, we have deals in real estate, pharma, hospitality, oil & gas, distribution, etc. Healthcare is a sector we do particularly like and will always consider in the future.

AL: How does Covid-19 affect Vantage Capital's operations? 

LA & DB: On the investment side, Vantage’s operations have not really been impacted by Covid-19: we closed Alleyroad in South Africa during lockdown and CIM Santé while Morocco was still under State of Emergency. Moreover, our pipeline is also promising with deals being in execution (i.e. signed term sheets, on-going due diligence, etc.) that should hopefully close by the end of 2020 / early 2021.

On the portfolio side, depending on the sector, companies were more or less impacted by Covid-19 and the imposed lockdowns. Moreover, the nature of Vantage’s instrument (i.e. bullet instrument with grace period on cash coupons) do not put pressure on the companies’ cash position; therefore, during the sanitary crisis, we did not have to go through major restructuring.

AL: How long do you expect the crisis to last, and how do expectations affect your investment decisions?

LA & DB: This is a $1bn question… Unfortunately, no one really knows how long the crisis will last, we all hope for the best. One thing is sure, even when the sanitary crisis will be fully under control, the economic consequences deriving from it will be felt for a while globally. The extended lockdowns all over the world have and will still weigh heavily on the countries’ economic health.   

Concerning our investment decisions, we do not expect any changes. We will continue to follow our in-depth due diligence process to make sure that we invest in quality assets. Vantage only considers established companies leading on their respective sectors. It is true that some sectors that were hardly hit by the Covid-19 crisis, like hospitality, will be more difficult to invest in in the short term.   

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