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Carlyle Sub-Saharan Africa Fund explores new opportunities

Anna Lyudvig
July 20, 2016, midnight
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Word count: 653

The Carlyle Group is working on a number of interesting opportunities for its African fund, according to Marlon Chigwende, Managing Director and Co-Head of the Carlyle Sub-Saharan Africa Fund.

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The Carlyle Group is working on a number of interesting opportunities for its African fund, according to Marlon Chigwende, Managing Director and Co-Head of the Carlyle Sub-Saharan Africa Fund.

In April 2014, the alternative asset manager announced the final close of its Sub-Saharan Africa Fund, reaching $698m, almost $200m above its initial target of $500m.

The Fund has made five investments and exited one of them - Export Trading Group, an African based supply chain manager in Tanzania.

To date the Fund’s portfolio include: J&J Africa, a logistics business in Mozambique; Diamond Bank, a Nigerian Tier II Bank; Tiger Automotive (TiAuto), a leading tyre retailer and wholesaler in South Africa; and Traxys Group, a physical metals and minerals commodity merchant, logistics and trading firm with Africa presence.

“We are very busy with our existing portfolio, trying to add value,” Chigwende said.

“There is a whole variety of things where you can add value. A lot depends on the needs of the portfolio company. Sometimes it’s corporate governance, sometimes it’s helping with strengthening management, and sometimes it’s geographic expansion or acquisition,” he added.

Chigwende said that the Sub-Saharan Africa Fund hasn’t closed any deals this year.

“The markets are closed or cautious and there are not that many deals that are happening. Today, we are definitely in a risk-off environment globally. I don’t think global investors are in a bullish mood right now. But I expect things to improve over the next 12 to 18 months from an industry perspective,” he said.

“We are very busy. Potentially we might close a deal [by the end of this year], a lot depends on the discussions we are having with potential vendors of the businesses. We are in a detailed diligence on a number of opportunities,” he told Africa Global Funds.

Chigwende said that due diligence is determined by the quality of information that the vendor is providing: “What you are looking for is good businesses that are well run, that you can buy at an attractive price.”

“On a risk adjusted basis, your target return is determined by the risk adjusted opportunities that you see. You can’t go and say that you target X or Y number, because it depends on a sector, on the maturity of the business, and other parameters,” he added.

Established in March 2012, the Carlyle Sub-Saharan Africa Fund makes buyout and growth capital investments in private and public companies from offices in Johannesburg, SA and Lagos, Nigeria.

The Carlyle SSA team focuses on transactions where it has a distinctive competitive advantage and can create tangible value for companies in which it invests, through industry specialization, deployment of human capital and access to Carlyle’s global network.

Carlyle’s target industries include consumer goods, financial services, agribusiness, and energy.  

“Most of our opportunities continue to be consumer focused. The average ticket size for the Fund is around $70m,” Chigwende said.

“For our strategy and for our approach we got more than enough opportunities that are out there. It’s more about negotiating the right terms and price,” he added.

For Chigwende, South Africa, Kenya and Tanzania look attractive at the moment.

“We are Sub-Saharan Fund and we are looking for opportunities in Southern, East and West Africa. We are seeing opportunities pick up particularly in Southern Africa and East Africa,” he said.

Commenting on the fundraising environment in Africa, Chigwende said that most of the larger funds have recently raised or closed a fund.

“There aren’t that many funds north of $500 that are in the market today. In that part of the market, there is a lot of dry powder in the private equity space,” he said.

“That being said there still isn’t a lot of capital in Africa by any measure. There was more money raised in India than across the entire African continent last year. I think there’s more interest, I don’t think there’s more money,” he added.

 

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