There can be no doubt as to the importance of supporting the entrepreneur culture and
entrepreneurial thinking in South Africa. With the formal economy having to carefully
manage the geopolitical uncertainty, there is often apprehension around where
businesses poised for growth can obtain funding. While there are a number of different
funding structures available, Private Equity (PE) offers the possibility of partnering with a
team with both the finance and the business sense.
Private Equity can be utilised to fund business growth by partnering with management
teams for sustainability and growth. Reputable private equity firms should certainly be
considered a great option for businesses as a growth mechanism and can use debt as a
lever to enhance growth further. Private equity investors also bring experienced financial
acumen to the table.
Laying Foundations for Growth
Well established private equity firms have real knowledge regarding a number of
industries and are able to add value by helping companies as a sounding board
particularly around strategies for growth. “This can include working alongside
management teams to help unlock business opportunities using established market
networks which allows for collaboration and expansion,” says Liz Kolobe, partner: Agile
Capital. “Taking on non-executive roles means that often corporate governance is also
shaped and improved upon.”
Additionally, regulatory frameworks like the Broad-Based Black Economic Empowerment
(B-BBEE) can be managed and shape businesses into more sustainable ventures. PE in
South Africa is uniquely positioned to enable a strong push for inclusive growth.
“We have seen the role of private equity evolve beyond traditional finance provider, to
encompass an analytical ability. This important tool can be hugely useful to the
management team’s skills set,” notes Kolobe. PE can certainly encourage a more
stringent approach to the various operational reporting and accounts; to give depth by
supporting business strategies; and networks are often a useful tool for attracting and
retaining high-level staff.
Shaping Outcomes
Analysis by the law firm DLA Piper indicates that when providing funding for companies,
PE investments generate a multiplier effect. This means that not only does the industry
serve its shareholders, it also creates socio-economic benefits for consumers. Businesses
backed by PE investments have been shown to grow faster than other types of
companies. This means that PE is able to have a positive impact on both profitability and
employment levels.
Additionally, research in the EBRD has shown that companies that have had some PE
investment have typically sustained high levels of revenue growth over a number of
years; Private Equity is also able to create value through industry expertise, managerial
skill and access to additional financing. This collective knowledge implemented within a
solid framework is intended to create positive financial outcomes and investor returns.
Other research by Norton Rose has indicated that there is a positive outlook for Mergers
& Acquisitions (M&A) in South Africa for 2025. Our improved macro-economic sentiment
along with some fast growing sectors, means there is still an opportunity for solid, stable
businesses to add ‘bolt-on’ businesses to enhance any deliverables (and affiliated
services) for clients. Private equity could certainly be at the forefront of the M&A drive;
not only do the firms have the ability to assist with pipeline as well as assessing whether
they are the right fit, but also the experience to navigate these transactions.
The Right Funding at the Right Time
In South Africa, there is still a significant amount of ‘dry power’ available for private
equity transactions. “Most PE firms have various investment criteria,” notes Kolobe, “and
often private equity are the right partners for businesses that are started by
entrepreneurs and have a family legacy. PE allows for a business owner liquidity event as
well as the opportunity for a long term partnership that leads to business growth fuelled
by local knowledge.”
“At Agile Capital, we are committed to investing over long periods. While most private
equity funds have a 5 -7 year limit, we have longer-term investing strategies as we don’t
have the usual exit pressures,” says Kolobe. Exiting is an important part of the PE
process, and PE firms seek to recuperate any capital invested through dividends and the
disposal of an equity stake. Businesses are starting understand that there is often an
opportunity to utilise private equity to achieve the optimal outcomes (for a business).
The right funding option for any business will always depend on what the business is
seeking to achieve. “Knowing what options are out there and what works best to ensure
a healthy business is the ultimate reward, and reputable PE firms will always look to support an effective management team and steer the business towards long-term success,” concludes Kolobe.
Based in Johannesburg, South Africa, and led by exceptional investment professionals,Agile Capital
invests across sectors in the South African economy. The company has built a substantial, diversified investment portfolio and built long term partnerships, yielding favourable returns for investors. Agile Capital prides itself in being a value adding investment partner. The company is 100% black owned and has significant black women ownership, providing a sustainable empowerment solution to its partner companies. outcomes (for a business).
https://agilecapital.co.za/
https://www.linkedin.com/company/agile-capital-pty-ltd/about/
