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PAPE Fund 3 makes fifth investment

Anna Lyudvig
June 15, 2022, 6:09 p.m.

Word count: 540

PAPE Fund 3, a mid-market South African private equity fund, has acquired an equity interest in Entersekt, a global leader in device identity and payment authentication.

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PAPE Fund 3, a mid-market South African private equity fund, has acquired an equity interest in Entersekt, a global leader in device identity and payment authentication.

Entersekt is PAPE Fund 3’s fifth portfolio investment.

PAPE Fund Managers Principals, Dr Zuko Kubukeli and Mr Ikageng Moatshe, who led the transaction, said: “The business is a global market leader in the digital security landscape off the back of a scalable world class IT infrastructure and architecture. At PAPE we back local entrepreneurs with a globally- competitive edge and offering that are looking for a partner that can provide strategic value-add and expansion capital. In the Entersekt team and shareholding structure we believe we are poised for stellar growth.”

Entersekt, which was founded in Stellenbosch in 2010, currently secures over 1 billion transactions every month, protecting millions of financial services customers across the globe.

Entersekt is recognised as an innovator in the global authentication market, known for delivering market and industry firsts.

The company already boasts an impressive shareholder base with prominent shareholders including Nedbank Private Equity, Rand Merchant Investment Holdings (RMI) and the prominent US-based investor group, Accel-KKR (AKKR), a recognised global leader in private equity with a track record of making successful investments in mid-market software and technology-enabled services businesses around the world.

"We are thrilled to welcome PAPE on board,” said Schalk Nolte, CEO at Entersekt. “The fund has a very strong footprint in our home market in South Africa, and their expertise will bring a valuable perspective alongside our existing shareholders. PAPE’s investment helps us further bolster operational support as we scale Entersekt in our strategic focus regions. We look forward to achieving great success together.”

PAPE Fund 3 was established in July 2018 and reached final capital raising in January 2020, with ZAR1.03bn in investor commitments. The fund has a 10-year investment-to-exit horizon.

To date, PAPE Fund Managers has deployed approximately 68% of the total commitments and anticipates concluding two further investments in the next three months, bringing to an end the Fund 3 investment program.

Investors in PAPE Fund 3 include various South African pension funds and asset managers, a Netherlands-based development finance institution, and a pool of family offices.

The fund has already concluded four investments into businesses involved in the logistics sector; the software development sector; an automotive conversion enterprise; and a company servicing the beverages industry in South Africa and across 12 African states. PAPE Fund 3’s investment mandate is focussed on deploying capital into mid-cap unlisted South African domiciled or headquartered businesses where management are significantly invested alongside us.

While Entersekt continues to grow market share in the South African market and the rest of Africa, it also has strong growth prospects in the rest of the world, in particular in the USA.

Dr Kubukeli said: “Our research and the extensive engagements with management and partners in AKKR and RMI, indicates that the US banking sector currently has a comparatively weaker digital security and regulatory environment.”

“We believe that working with AKKR, RMI, Nedbank, Mastercard and our other partners, Entersekt can achieve a material share of the $2trn authentication market. We are excited at the opportunity to partner with Entersekt’s management team and our co-shareholders as the company ratchets up its expansion programme.”

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