Transcript Actis Content - Rural Finance

Actis Africa Agribusiness Fund
October 2007
Who is Actis?
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Leading Emerging Markets Private Equity Firm with a Focus on Africa
Who is Actis?
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60 years experience in investing in emerging markets
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Over US$3bn funds under management and an
additional US$1.4bn of new funds committed
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Focus on:
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Africa, Asia and Latin America
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Expansion capital, buyouts and privatisations
London
Casablanca
Actis in Africa
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Managing a new African fund of US$550m
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Single investments US$10m-75m
Can syndicate equity to co-investors for large transactions
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Use of leverage enables access to large transactions
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Property Fund of US$100m
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Agribusiness Fund of US$100m
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Empowerment Fund of US$50m
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Cairo
San José
Santa Cruz
Lagos
Karachi
Karachi
Delhi
Mumbai
Bangalore
Nairobi
Beijing
Kuala Lumpur
Singapore
Jakarta
Johannesburg
To finance participation of African entrepreneurs in transactions
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Investment Criteria/Strategy
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Actis generally targets established firms in growth sectors
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Agriculture, Consumer goods, Telecommunication, Financial Services, Mining & Industrials
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Specialised infrastructure funds: Property, Transport, Power and Agribusiness
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Strong management team: track record and business principles
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Focus of risk capital provision
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Clear and realistic exit route with investment horizon of 3-7 years
Align interests of all major stakeholders (other shareholders, management, regulators, etc.)
Investment range, US$10m to US$75m and stakes from 25% to 100%
Expansion capital (organic/M&A)
Change of control transactions (MBOs, MBIs, P2P, strategic alliances)
Privatisations (generally under-capitalised requiring modernisation)
Appropriate combination of equity, mezzanine finance and debt
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Actis value-add approach
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Leverage global contacts with Operators, vendors, government and regulators to help business grow
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Leverage office network for cost effective market intelligence, and business development
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Able to make follow on
Investments
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Leverage contacts with
lenders and equity
investors
Growth
Finance
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Strategic direction
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Operational improvements
Strategy
Actis
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Reputation for transparency &
integrity/business principles
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Introduce high standards of
corporate governance and financial
management
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Governance
Recruitment
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Appoint industry experts to
the Board
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Participate in building
effective strategy
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Access to network of managers: assist
in recruitment
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Able to second staff if needed
Maximise shareholder and exit
values
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Agribusiness Fund
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Overview and Investment Strategy
Agribusiness Fund
• $92 million fund with CDC as Sole Investor
• To invest in equity and quasi-equity in the African Agribusiness sector
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• Established in January 2006
comprises activities related to production and processing of, and
services related to (i.e. inputs, logistics, distribution and marketing)
biological products, plant or animal, whether for food or non-food
Sample Portfolio Companies
Company
Sector
Country
Cavally
Rubber
Cote d'Ivoire
Mpongwe Dev't
Arable Farming
Zambia
Kilombero Valley
Forestry
Uganda/Tanzania
Teak
purposes
• Investment type
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mainly expansion capital in both new and existing investments
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includes rehabilitation and buy-and-build
• Control
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Control preferred but not exclusively
• New investment focus:
Tanganyika Wattle
Forestry
Tanzania
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Low capital intensity, participation across value chain
Nanga Farm
Sugar
Zambia
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No greenfield start ups
Tanzania Tea
Tea
Tanzania
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Deal size will be US$4m to US$15m
• Follow-on investments
Packers
Equatoria Teak
Forestry
Uganda/Sudan
Grain Bulk Handling Agri-infrastructure Kenya
Cavally
Rubber
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From US$1m
• Exposure
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Country: Max 50%; Sector - Max 33%
Cote d'Ivoire
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Critical Success Factors
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Back first class, local, aligned and experienced business management teams and sponsors
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Take control positions or, exceptionally, minority positions with significant influence
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Invest in value add, market led, established businesses in free markets
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Experienced sector specific and focussed management team at fund level
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Access to well established Africa wide Actis presence and deal sourcing
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Rigorous application of the Actis investment and decision making process
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Lessons Learned from Past
• Importance of management
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First class, local, aligned management and sponsor
• Markets:
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Growth potential; free not adversely controlled markets
• Maximise competitive advantage
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Agricultural production where climate and soils are word class; locate labour intensive industries where labour is readily available
• Production of basic commodity crops not normally attractive:
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Price controls; subsistence farmer competition; land / political issues
• Agribusiness risk mitigation:
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Location; competitive production advantage; invest in added-value operations; outgrower model
• Investment type:
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Expansion capital preferred; no greenfield start ups
• Infrastructure limitations
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Leads to excessive capital cost; acquire developed assets at discount to cost
• Exit
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Achievable, but timescale can be longer, mitigated by yield-based return
• Long term view
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Agribusiness and forestry not wholly suited to closed end fund structure
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New Investment Criteria - Deal
• Fully commercial return on capital
• Attractive value/entry price proposition
• Must have alignment with management, shareholders and other stakeholders
• Must have influence for value add, exit etc (control / strong shareholder rights)
• Clear route to exit, with Actis ability to control
• Proprietary deal flow preferable
• Enhances CDC’s reputation as a responsible investor
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Challenges for Private Equity in Africa
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Management skills:
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Limited entrepreneurial/managerial talent with successful track record
Information availability:
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Requires rigorous due diligence, often using external firms & industry experts
Pricing risk:
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use of external experts to address, limited comparables
Debt availability:
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Depth of financial markets and cost of debt
Exit risk:
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Capital redemption mechanisms and strategic buyer screening to assess exit prospects
Legal and regulatory framework:
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Ability to exercise legal agreements
Country risk:
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Market intelligence and influence can mitigate this risk
Exchange rate risk:
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Mitigated by foreign exchange denominated earnings
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Contact Details
Michael Turner
Paul Kavuma
Partner
Investment Principal
Norfolk Towers, Kijabe Street, 1st Floor
P O Box 43233-00100
Nairobi, Kenya
Tel: +254 202 219 952
Mob: +254 (0) 734 770978
Fax: +254 202 219 744
Norfolk Towers, Kijabe Street, 1st Floor
P O Box 43233-00100
Nairobi, Kenya
Tel: +254 202 219 952
Mob: +254 (0) 734 770978
Fax: +254 202 219 744
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