Kenya registered the highest number of private equity deals concluded in 2013, ahead of South Africa and Nigeria.
Experts said this indicates the growing profile of the East Africa region as a deal hunting territory.
Tanzania, Ethiopia, Cote d’Ivore and Ghana are also emerging as favourites of private equity fund managers, according to the 2014 East Africa Private Equity Confidence Survey published by consulting firm Deloitte.
Overall, East Africa region had 26 deals successfully concluded, followed by West Africa with 24 and Southern Africa with 19.
However, West Africa accounted for the highest value of deals, at $545 million, followed by Southern Africa at $491 million and East Africa with $163 million.
Private Equity funds closed 84 deals in 2013 compared with 58 deals in 2012. Of the total deals, 46 reported value of $3.69 billion. The rest did not report the value.
“Confidence in private equity in Africa is certainly increasing. Track records are deepening, growth is strong, risks are manageable and investors continue to rate the region highly amongst their emerging markets options,” said Alexander Van Schie, the director of corporate finance services at Deloitte. He jointly authored the report with Andrea Bohnstedt, a partner at Africa Assets.
“Going forward, we see more competition among PE fund managers in deal making because there are more funds available,” they noted in the report.
“PE fund managers now need to be creative to find deals. They need to be flexible in their terms. For instance, some companies fear losing control if they partner with PE funds. So what should happen for instance, is for the managers to come in as debt partners and when the value of what they can bring into the business is seen, then the business owners are comfortable to invite them as equity partners,” said Mr Van Schie.
According to the report, this year looks good for deal making in the region because a number of deals have already been confirmed.
Majority of PE fund managers interviewed by Deloitte said that their focus will be on new investments in the next 12 months.
“Respondents expect buying more in 2014 rather than exiting. Majority of the managers report that their funds are in the investments and strategic growth phases and will therefore invest more in 2014,” said Ms Bohnstedt.
Most PE managers said they will focus on food and beverage, agribusiness, retail, healthcare and pharmaceuticals and financial services sectors in East Africa.
Fusion Capital last week invested about $2.8 million in the family-owned bakery GAL Baking Services of Kenya through both debt and equity for a 45 per cent stake.
The money will be used to mordernise Nairobi-based bakery and increase its outlets to 15 from the current three. Demand for cakes, biscuits, cookies and other wheat products has been on an increase over the years in tandem with the change in consumer preferences.
Fusion Capital funds small and mid-size enterprises within the East African region that require capital injections of between $25,000 and $25 million.
DOB Equity, headquartered in Netherlands, is this week expected to launch its operations in the Kenyan market.
The firm, which has recently opened a representative office in Nairobi to cover its East African operations, makes initial investments of $345,065 to $2.8 million per deal with the possibility of follow-on investments.
Other deals announced this year in East Africa region include Catalyst Principal Partners acquisition of majority stake in Tanzania of a heavy equipment rental and logistics firm, Effco.
Agri-Vie, the private equity fund focused on food and agribusiness investments, announced a $5 million investment into Kariki Group, a specialist Kenyan flower exporting business.