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.
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SPE Capital Partners is an independent private equity firm formed in 2016 from a spinout from investment bank Swicorp. The SPE Africa Industrialisation I Fund (AIF I) is a generalist private equity fund targeting primarily growth capital investments in SMEs and mid-market companies in North Africa, with a focus on Egypt, Morocco and Tunisia. The fund’s first closing reached $80 million. SPE AIF I recently announced an equity investment of $26 million in H&S Invest Holding, an FMCG distributor in Morocco.
We asked Nabil Triki, managing partner at SPE Capital Partners, about the firm’s investment philosophy and the biggest misconception about his job.
1. Explain your firm’s investment philosophy.
SPE Capital is led by an experienced investment team that has been together for over a decade, investing in growth companies in Africa and the Middle East.
SPE AIF I is a private equity vehicle established to make investments in Africa, with a particular focus on North Africa. AIF brings together a set of factors which render it a unique proposition for investors:
– Focus on control transactions, in a defined set of sectors and a specific number of priority markets;
– World-class local investment team, with extensive private equity investment experience;
– Successful track record, with a predecessor fund which ranks among the top-performing funds in Africa;
– Solid transaction pipeline, the bulk of which is proprietary. By end 2019, we expect to have closed five transactions for the fund.
2. What is the greatest investment lesson you’ve learnt?
The quality of the partner is of paramount importance in assessing a company for a potential investment, irrespective of the intrinsic value and potential of the asset being considered. Oftentimes, we focus on the asset under consideration and discount the importance of the partner, in terms of capacity to listen, adapt and drive change.
3. Identify an untapped opportunity for private equity investors in Africa.
In a number of markets in Africa, factors including succession issues are creating opportunities for taking controlling stakes in quality companies. In an environment where growth is not sufficient to achieve target returns, such situations create opportunities to create value by combining several levers, including margin improvement and deleveraging, and allow PE fund managers to have a transformational impact on portfolio investments.
Today, few PE investors in Africa are equipped and able to execute and drive value from control transactions.
4. What is the biggest misconception about your job?
I believe the biggest misconception is that the most important capability within a PE investments team lies in its capacity to value companies. Based on my experience, in the life of an investment, from entry to exit, the most value-accretive capabilities are (1) the ability to identify/select companies which have that “special something” needed to grow and succeed, (2) the capacity to think strategically about opportunities such companies can take advantage of, and (3) the ability to understand and positively influence partners and senior management team at portfolio companies. With experience, one learns that five years is actually a very short period in the life of a company and that the biggest challenge is getting all the resources of a particular company aligned and focused on value creation during this short period.
5. Name the one deal you wish you invested in.
I can’t really think of one. In this line of business, it is important to fully internalise the fact that one creates value for investors on a fund level rather than on a transaction level and that, within a particular fund, solid returns will come from having a few investments achieve superior returns, while at the same time limiting the downside on less-successful investments, through a disciplined approach and creative structuring.