Josep Oriol, head of Ciel Capital, East Africa branch. The firm is already contemplating a tweak or two on the script for Kibo Fund II as they finalise arrangements for the formal fundraising.
Mauritius-based firm Ciel Capital is preparing to start fundraising for its second Eastern and Southern Africa focused private equity fund.
Drawing lessons from its experience with the first fund, Kibo Fund, the firm is already contemplating a tweak or two on the script for Kibo Fund II as they finalise arrangements for the formal fundraising, which head of East Africa, Josep Oriol, says is expected to kick off in a month.
The firm targets raising about $80 million, which would not depart from the original philosophy.
With a 10-year lifespan, like its predecessor, it would, however, expand its area of investment to rope in countries such as Zambia, Mozambique, Botswana, Rwanda and Burundi which the Ciel Capital executive says they have ‘looked at in a very opportunistic way.’
When it gets to investing, the new fund will be targeting a number of sectors, and would be scouting for deals whose sizes range between $3 million and $7 million.
Launched in 2008, its predecessor, Kibo Fund closed at $37.4m (€28.5 million).
Mr Oriol explains that at the moment, the Kibo Fund is almost fully invested, and its current portfolio spans several key growth sectors in the region.
From Orange Madagascar, a mobile service provider in the country; the Swan group, a life and general insurance group in Mauritius; and I&M Bank Tanzania, a financial services provider invested in jointly with I&M Bank of Kenya; to Ugandan firms Electromaxx and IMG, a healthcare provider.
“We have looked at many deals, well over 200, before getting to these investments,” he said, adding that the fund was however unable to invest within its Kenyan base due to ‘internal issues.’
Among the drawbacks as it pursued investment opportunities in Kenya were cases of entrepreneurs overvaluing, which kept its executives from investing.
Mr Oriol says that at the moment, private equity is gaining momentum across the continent, and there is likely to be many secondary exits, where private equity funds sell their portfolio companies to larger private equity players.
However, he warns that there is a risk of ‘overheating’ in the industry, a situation where there are too many funds in an economy that still lacks entrepreneurs in number, and skill sets in management.
This will end up in money chasing good deals, leading to overinflated entry valuations, with unreasonable multiples being paid.
“This is bad for everyone — the entrepreneurs think they have done well, but then they have much more pressure to deliver the right returns to the investors.
The investors enter at an expensive price, and they need to achieve much more to provide the right returns to their limited partners,” Mr Oriol explains, arguing that at the end of the day, private equity, more than any other financial industry, relies on solid fundamentals, which include growing markets, capable teams, excellence in execution.
“Too much money, means future disappointment, as there are limited really good deals in small economies like East Africa,” he said.
