TIME FOR NEW THINKING Knowing that, it’s important that investors in African companies start to think a little differently. One solution that could work is if several players come together to launch a continuation fund (or a number of them). Typically, continuation funds involve a private equity investor moving a portfolio company from an existing fund into a new special-purpose vehicle. Investors can then roll their stakes in a company into the continuation fund or receive cash for their stakes from other investors. Such funds offer a number of advantages, including greater time and flexibility. Continuation funds extend the lifespan of investments, which allows greater time for companies to achieve their growth objectives. By giving more time, they allow the potential for higher valuations and better returns. It also means that the original investors can keep investing in more companies rather than desperately seeking out exits in potentially difficult markets. There may be even more potential if there were continuation funds for different sectors, headed up by experts in those sectors. So, for example, a private equity investor could build up a retailer to the point where it’s ready to go into a dedicated retail continuation fund. The same could potentially be true for players in a number of sectors, including manufacturing, ecommerce, or logistics. A further extension of this concept could be in the tenor of these funds, from a handful of years to realise value and exit to permanent capital vehicles. Given enough time and support, how many more exits would we start to see? More importantly, how many more big exits would we see? BUILDING A LASTING LEGACY Make no mistake, I don’t think private equity companies are doing a poor job in Africa. I’ve seen too many companies in our own and other portfolios thrive as a result of investment to think that. But I’ve also been around long enough to know that if players across the sector are really interested in building a lasting legacy on the continent, then it can’t be business as usual. Instead, we need to start thinking about new ways of doing things with the aim of producing more and bigger exits, and more importantly more significant and sustainable African success stories, that advance Africa’s overall business environment. Bryan Turner Partner Spear Capital If players across the sector are really interested in building a lasting legacy on the continent, then it can’t be business as usual. US$7.6 BILLION US$7.4 BILLION over in 2021 429 DEALS was invested across in 2022 626 DEALS Versus Finance Monthly. Investment 77
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