In 2016, Ethos launched our inaugural mid-market private equity fund. Ethos Mid Market Fund I will target commitments of R2.5 billion (hard cap R3.0 billion).
The Fund will seek to make investments of between R100 million and R350 million, predominantly in mid market leveraged buyout transactions. This is a part of the market in which Ethos has a proven track record through Buyout Funds III and IV.
Importantly, the Fund will be BEE-majority owned and will be able to participate in deals as the BEE Partner. Ethos believes that the combination of significant empowerment credentials and strong execution capabilities will give the Fund a distinct competitive advantage.
Ethos Mid Market Fund I investment strategy
The core strategy for the Fund will be mid market leverage buyout transactions of between R100 million and R350 million, where Ethos will seek to be the lead shareholder. Ethos will target high growth potential companies that are often not optimally capitalised, leveraging Ethos’ proven value add and operational transformation skills. Ethos anticipates at least 50% of capital to be deployed in this strategy.
Secondly, in certain cases, the Mid Market Fund will also seek to co-invest with Ethos Buyout Funds as their BEE-shareholding partner, leveraging the existing knowledge and skill of the Buyout investment teams.
Lastly, the Mid Market Fund will seek to co-invest in certain special investment opportunities, where the Fund feels it can leverage its BEE credentials. Having pioneered BEE transactions in the context of South African private equity, Ethos continues to be a leader in successfully structuring and executing these investments, which is a significant deal sourcing and competitive advantage. Ethos completed the country’s first ever private equity-based BEE deal (Kagiso Publishers in 1994). Continuing this strong tradition, 63% of the investments in Fund V and 67% of Fund VI have had BEE participation.