Due Diligence: Investor talks doing deals in Francophone West Africa

Jean-Marc Savi de Tové

How we made it in Africa’s ‘Due Diligence’ series asks top players in Africa’s private equity industry about how they are mastering the art and science of profitable dealmaking and fundraising. Doing the due diligence on those who do due diligence for a living.

This article is published in association with Africa Private Equity News, a one-stop source for industry-related information. Stay up to date by downloading the free Africa Private Equity News app: Android | iOS | Scan QR code from desktop


Adiwale Partners, established in 2016, is currently fundraising for its Adiwale Fund 1, a first-generation private equity fund targeting high growth potential small and medium-sized enterprises (SMEs) in Francophone West Africa. The African Development Bank recently committed €12.5 million to the fund.

We asked Jean-Marc Savi de Tové, co-founder and managing partner at Adiwale, about the greatest investment lesson he has learnt and opportunities in the region.

Explain your firm’s investment philosophy.

Adiwale Partners provides expansion capital to SMEs (mostly the M) in French-speaking West Africa. We are targeting minority investments of €3-€8 million per company. We are looking for companies led by ambitious and experienced management teams who want to grow regionally. They must be addressing local demand, especially from the emerging middle class. We like to work alongside teams that are willing to make the necessary HR and systems adjustments to be able to absorb rapid growth.

What is the greatest investment lesson you’ve learnt?

The first one is that you need to stick to your well-thought-out investment strategy and process. The market tends to jump on the latest trends, but a private equity investor should avoid falling into that trap. We need to think about our key themes and what will happen over the next five to 10 years and build a strategy around that. We then need to stick to that strategy and amend it only when circumstances materially change. Similarly, we shouldn’t divert from our investment criteria too much. It is easy to fall in love with deals, as opposed to evaluating them against our own criteria.

A second lesson is that in Francophone West Africa, reference calls don’t work. Unless someone knows you better than the person you are asking questions about, they won’t tell you what they know. It is not part of the culture to share secrets with strangers. You therefore need to be introduced by the right person, or be very creative when it comes to background checks to be able to really know what people are about. With SME deals it is of vital importance to know who you are getting into bed with.

Identify an untapped opportunity for private equity investors in Africa.

There are both sector and geographic opportunities. In terms of sectors, there are opportunities in transport and logistics, business services and light manufacturing in Francophone West Africa. In the case of local manufacturing, if you can compete against imported products it could be very lucrative. No need to expand on the consumer story, which plays out everywhere in Africa. But I think on top of the consumer story, sectors mentioned above all offer untapped opportunities.

Geographically speaking, there is an opportunity to help companies expand regionally across West Africa. Many local companies do not scale up because the entrepreneur is happy to stay within his natural country boundaries. However, when you are able to help them expand into neighbouring countries, either organically or through small acquisitions, you can really create a very nice platform. That is a huge opportunity in this region because individually taken, the economies are quite small.

What is the biggest misconception about your job?

Very often SME entrepreneurs mistake us for a bank. You would be talking about private equity and explain the value that you bring, strategy, execution, etc, and at the end of the conversation the entrepreneur would ask what interest rates we are charging. Two out of every five companies we speak to ask that question. Or you could be close to signing a term sheet, and the investee would say, ‘Hey, I’ve heard that if I don’t perform you are able to take over my company’. And we would then have to explain that is not true. The market is generally uneducated about private equity and we need more advocacy to reach the right level of knowledge about the asset class.

Name the one deal you wish you could invest in.

We would like to create a pharmaceutical retailer in Francophone West Africa, like CVS in the US or Boots in the UK. However, the local regulation is quite stringent in that each pharmacy has to be owned and operated by the pharmacist. There is huge demand for quality medicine from trusted brands at an affordable price. If you are able to build a pharmaceutical retailer with operations in Côte d’Ivoire, Senegal, Mali and Burkina Faso, I think you’ll make a lot of money. You would then address a real social issue, and you’ll make a lot of money. That would be the deal we would love to do.

What are the skills needed to succeed in Africa’s private equity industry?

When investing in SMEs you need to act as a project management office (PMO) to the company. You need to be able to track everything that the company does, at least key operational levers as if you were sort of an internal project manager to them. This is key at the SME level, otherwise things can go off the rails pretty quickly. As SMEs grow and adopt strong processes, this risk tends to reduce.

In addition, there is a need to focus on giving quick returns to investors. At the end of the day we are in the IRR game. One needs to have the ability to structure a deal to generate income quickly or to derisk the position when the opportunity arises. Obviously, you want first to help the company grow, but at the same time you need to be focusing on the clock. Private equity investors in Africa have been able to do well on the multiple of capital side of things, but not on IRR, which means they have been more patient than elsewhere.

This article is published in association with Africa Private Equity News, a one-stop source for industry-related information. Stay up to date by downloading the free Africa Private Equity News app: Android | iOS | Scan QR code from desktop