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African PE deals reach record high in 2021

Anna Lyudvig
April 19, 2022, 1:21 p.m.

Word count: 741

The total value of private capital deals reported in Africa reached a record high of $7.4bn, according to AVCA’s 2021 Annual African Private Capital Activity Report.

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The total value of private capital deals reported in Africa reached a record high of $7.4bn, according to AVCA’s 2021 Annual African Private Capital Activity Report.

This represents a 118% increase compared to $3.4bn registered in 2020, surpassing the annual average deal value of $4bn between 2016 and 2020 (+85%).

This signifies the gradual maturation of private investment in Africa, which rose at 13% (CAGR 2016-2021).

The findings are a testament to the success and visionary work of firms whose pioneering missions encourage the growth of African economies through digital transformation, innovation with finance, climate-smart agriculture - and attract local and global investments. 

In 2021, the total volume of private capital deals reported in Africa was 429, a 66% increase compared to 258 deals recorded in 2020 - exceeding the annual average deal volume of 215, experienced between 2016 and 2020 (+100%).

Overall, the industry's deal activity rose to 19% (CAGR 2016-2021).

The growth in deals demonstrates a private capital industry maturing as businesses and economies across the continent transition from resilience to recovery. 

Over the last two decades, Africa's private capital landscape has established itself as an increasingly attractive and progressive region for private investment.

As such, private capital fundraising has mirrored the trend of private capital deals - reaching a record level of $4.4bn in 2021, a 4x year-on-year increase, which also exceeds the annual average over the past five years by 63%.

The report reported that $18bn was the total value of final closed private capital funds between 2016 and 2021.

By providing a detailed overview of the market, the AVCA report includes critical insight into doing business in West, Southern, East, and North Africa, with insight into the deal sizes, economic landscape, and regulatory environment across multiple jurisdictions.

The report finds that in 2021, West Africa attracted the largest share of deals at 33%, followed by Southern Africa (20%) and North Africa (17%).

The report also found that large multi-regional deals across the continent accounted for the largest share by value at 40% in the same year.

Financials was the most active sector by volume (30%) and attracted the largest share of deal value (39%) during the last year.

The rise of fintech contributes to the sector receiving the largest share of deals.

With several traditional banks closed during the pandemic, many people turned to mobile money, digital banking applications and remittances to help support their families’ livelihoods and financing needs – data from the World Bank revealed that remittance inflows to Sub-Saharan Africa rose in 2021 by 6.2% to $45bn.

The trend supports the sector's growth in Africa as Financials' share of deal volume and value climbed to 24% and 29% in 2019-2021, from 13% and 7% respectively in 2016-2018.

Between 2016 and 2021, Financials (20%), Consumer Discretionary (15%), Industrials (12%), and Information Technology (12%) were the most active sectors by volume.

Overall, Financials and Utilities were the largest sectors by value, attracting 19% and 18% respectively from 2016 to 2021.

In total, 36 African PE exits were reported between 2021, a 13% increase compared with 2020.

This increase reflects the resilience of the industry returning to onward growth. In line with trends found in 2020 by AVCA, exit to Trade Buyers was the preferred exit route (50%) in 2021 on the continent.

Sale to PE and other financial institutions, the second exit mean, represented 31% of the total number of exits reported in 2021 - with exits by public offering accounting for 3% of the total volume of exits reported in Africa over the course of 2021.

Abi Mustapha-Maduakor, CEO at AVCA, said: "The report highlights how Africa's economy continues to be fertile ground with attractive investment opportunities for investors in search of yields. As innovation across Financials, Technology, Energy, Healthcare enables the pace and scale of pioneering companies - new alliances with local and international investors continue to progress our industry and Africa's growth story."

"We are seeing new opportunities for partnerships with Africa and other regions of the world abound; Africa's Private Capital industry shows no signs of slowing - these alliances propel African businesses and economies from resilience to recovery. The 429 deals reported across the continent in 2021 evidence a 66% increase from 2020, totalling US$7.4bn in value. We are delighted to see the growth in fundraising, volume and value of deals across PE and VC, and we look forward to continuing our role, supporting the industry in a reinvigorated era of growth."

 

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