Waco Leads Recent Trend Towards Private Equity Deals
There have been an increasing number of private equity deals in recent years. The acquisition of Waco International by CCMP Capital Asia and the company's senior management team for R5.4 billion is the largest private equity transaction in South Africa.
The previous biggest deal was the acquisition of clothing retail holding company Pepkor by Castellina Investments for R2.1 billion. This deal was finalised in January 2004.
The largest private equity deal last year is believed to be the sale by Delta Electrical Industries of its repairs and services and replacement parts divisions to a consortium led by Ethos Private Equity and Actis for R1.296 billion.
KPMG and the SA Venture Capital Association conduct an annual survey of the private equity industry's performance. Its next survey report, reflecting transactions finalised last year, is due for release in about May.
However, its 2004 report revealed that reported private equity investments increased by 61 percent from 2003 to a record R6.9 billion. It stated that investment activity was undoubtedly stimulated by black economic empowerment considerations.
The report added that the overall average investment deal size had increased from R7.3 million during 2003 to R11 million in 2004.
Business Partners, previously the Small Business Development Corporation, was again the most active investor player in the South African private equity market, contributing 72 percent of the number of investments made, although only 5 percent in terms of the cost of total investments made during the year.
The average deal size increased to R36.7 million if Business Partners' investments were excluded. The value of disposals increased to R3.7 billion in 2004 from R1.7 billion in 2003.
However, disposals to other private equity firms or financial institutions were the option that attracted the most transactions in value terms, although sales to management via buy-backs attracted the highest number of disposal transactions.
The average proceeds per disposal increased from R17 million in 2003 to R29 million in 2004. Funds under management by South Africa's private equity industry increased by 7 percent to R42.7 million at the end of December 2004 compared with the corresponding period in 2003.