Transcript
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    KPMG andSAVCA

    Venture Capital and Private Equity Industry

    Perormance Survey o South Arica

    covering the 2012 calendar year

    June 2013

    kpmg.co.za

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    b

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    KPMG and SAVCA Private Equity Survey 1

    Foreword 2

    Highlights 4

    Sources of information 8

    Introduction to private equity 10

    Black Economic Empowerment 14

    Funds under management 16

    Fund raising activity 27

    Investment activity 32

    Analysis of BEE investments 40

    Exits 42

    Performance 48

    Private equity investment professionals 50

    Participants 54

    Glossary 58

    Contents

    The inormation contained herein is o a general nature and is not intended to address the circumstances o any particular individualor entity. Although we endeavour to provide accurate and timely inormation, there can be no guarantee that such inormationis accurate as o the date it is received or that it will continue to be accurate in the uture. No one should act on such inormationwithout appropriate proessional advice ater a thorough examination o the particular situation. The KPMG name, logo and cuttingthrough complexity are registered trademarks or trademarks o KPMG International.

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independentmember rms aliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed inSouth Arica. MC10034

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    2 Foreword

    KPMG and SAVCA are proud to have collaborated or the thirteenth year in producing

    the 2012 KPMG and SAVCA Venture Capital and Private Equity Industry Perormance

    Survey. The survey is widely recognised as one o the most detailed o its type globally

    and has given participants and other stakeholders greater understanding o the industry

    and its trends.

    Questionnaires were emailed to 126 potential survey participants; 95 participantsrepresenting 102 unds responded. Alternative sources were used to obtain inormation

    on a urther 15 private equity rms representing 15 unds. Although these did not

    provide us with as much detail as our questionnaire, we believe the inormation is

    complete and understated i anything. From both KPMG and SAVCAs understanding

    o the industry, we believe that the survey represents in excess o 90% o the South

    Arican Private Equity industry by unds under management.

    This years survey refects an industry on the move, driven by revitalised global investor

    appetite and beckoning opportunity in the Arican and South Arican market. The lit in

    unds under management in the South Arican market refects both the sturdy growth

    in portolio values and the outcome o successul undraising programmes during the

    course o 2012. Over three, ve and ten years, the returns rom private equity continue

    to outshine those rom listed equity and is one reason why local and oshore investors

    are paying attention and committing capital to the asset class. The undraising drive has

    accelerated into 2013 and already includes some headline-grabbing und closes; next

    years survey thereore is likely to show an even more sizeable rise in commitments.

    Supported by und managers growing access to unds, and rom a post-crisis inclination

    towards ollow-on investments in existing portolio companies, there now is a

    discernible shit back in avour o making investments into new assets. Although deals

    are being signed across industries, a ocus on inrastructure is evolving and shows an

    appreciation o the tremendous growth and developmental opportunity in the energy,

    transport, telecommunications and social inrastructure sectors. A related trend is the

    expanding geographic reach north o the South Arican border, as pan-Arican mandates

    become more popular and und managers expand their networks.

    Many South Arican private equity houses are sitting on mature portolios and are

    readying or exits. The deal fow trend is likely to gather pace during the course o 2013

    and will be a blend o sales to trade buyers, to other private equity rms and possibly

    through listings on the stock exchange.

    Regulation remains a predominant theme in South Arican private equity and is one o

    the highlights o the past ve years or so. Now, with ar greater clarity on the regulation

    and legislation that govern the industry, und managers and investors are able to

    navigate the asset class with a degree o condence that didnt exist a ew years ago.

    Foreword

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    KPMG and SAVCA Private Equity Survey 3

    Changes to pension und regulation that gives trustees scope to allocate up to

    one-tenth o their portolios to private equity, and thereore to improve portolio

    diversication, are heartening. So too is the commitment made by the Government

    Employee Pension Fund, the largest pension und in Arica, to allocate up to 5% o

    its R1.2 trillion portolio to private equity.

    For pension unds, development nance institutions and other institutional investors,private equity, through its relationship-driven investment approach, its accountability to

    investors and its medium to long-term horizon, is a powerul tool or the implementation

    o sustainable-investment mandates. The asset class thereore has an increasingly

    important unction in the development o the Arican region, in a way that satises

    investors need or returns. The South Arican private equity industry has a notable role

    to play in this. This survey enables all interested parties a greater understanding o the

    industry and its trends.

    KPMG and SAVCA would like to extend their thanks to all the participants in the survey.

    We are also grateul to the survey committee and to KPMGs Private Equity Clients and

    Sectors team or all their eorts in producing this survey.

    Warren Watkins

    Director KPMG Services (Pty) Ltd

    Head o Private Equity Markets

    Arica Region

    Erika van der Merwe

    CEO: South Arican Venture

    Capital and Private Equity

    Association

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independent member rms aliated with KPMG International Cooperative(KPMG International), a Swiss entity. All rights reserved. Printed in South Arica. MC10034

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    4 Highlights

    South Aricas private equity industry has R126.4 billion in unds under management

    at 31 December 2012, an increase o 10.4% rom R114.5 billion at 31 December

    2011. This represents a compound annual growth rate o 11.6% (excluding undrawn

    commitments) since 1999 when the survey rst began

    R35.3 billion o the unds under management are in undrawn commitments at the

    end o 2012. R19.9 billion is exclusively available or uture investments in South

    Arica and R15.4 billion or Pan Arica (Arica including South Arica). This represents

    an impressive increase o 15.5% rom the R30.6 billion o the total undrawn

    commitments at the end o 2011

    O the R35.3 billion in undrawn commitments, 87.9% is with Independents (R25.8

    billion) and 15.0% Captives-Financial Services (R5.3 billion)

    Captives-Government and und managers that are themselves black-owned,

    empowered or infuenced (that is, have at least 5.0% black ownership) had R94.6

    billion o unds under management at 31 December 2012, an increase o 4.4% (2011:

    R90.6 billion). O the total unds under management, 74.8% are thus at least black-

    infuenced or classied as Captives-Government (2011: 79.1%)

    R14.4 billion was raised in 2012 which is an increase rom the R10.7 bi llion raised

    during 2011

    56.2% o all unds raised during 2012 were rom South Arican sources (2011:

    62.0%). South Arica has been the largest source o 46.0% o cumulative unds raised

    to date and not yet returned to investors (2011:45.4%)

    Investment activity or independents only, as a % o GDP, was 0.10% (2011: 0.14%).

    This compares with the UK o 1.05% and the US o 0.86%. Israel remains the

    highest percentage at 1.81%

    Investment activity is at R10.6 billion during 2012 where it was at R16.5 billion in

    2011. O the R10.6 billion invested, R5 bil lion was or ollow-on investments,

    and R5.6 billion was or new investments

    In 2012, R7 billion o unds were returned to investors (2011: R25.7 billion).

    Highlights

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    KPMG and SAVCA Private Equity Survey 5

    201220112010200920082007200620052004200320022001

    13.3

    5.2

    7.1

    10.3

    35.9

    8.3

    6.2

    10.5

    37.0

    10.2

    5.2

    8.7

    39.3

    11.9

    5.8

    7.8

    39.7

    13.9

    7.0

    7.7

    42.5

    18.4

    10.1

    6.2

    59.2

    24.7

    12.3

    6.4

    86.3

    31.2

    14.0

    10.5

    109.4

    39.7

    12.1

    5.3

    105.4

    21.1

    Captives Other

    Captives Government

    Captives Financial Services

    Independents

    12.3

    2.0

    114.2

    12.0 15.2 14.3 13.9

    24.5

    53.7 48.354.8

    24.0

    24.0

    10.3

    0.9

    114.5

    57.5

    21.7

    42.9

    Investment Holding Company0.0 0.00.0 0.0

    0.0

    0.0

    0.0

    0.0

    0.028.8

    4.6

    1.5

    126.4

    61.7

    29.8

    Composition o total unds under management at year end (Rbn)

    Total unds under management at year end, split by undrawn commitments and investments (Rbn) 1

    201220112010200920082007200620052004200320022001

    28.2

    7.7

    35.9 37.0

    39.3 39.742.5

    59.2

    86.3

    109.3105.4

    114.2 114.5

    7.9 13. 8 13. 816.0

    25.3

    31.6

    25.0 20.0

    18.2

    Undrawn commitments South Africa

    Invested

    29.1 25.5 25.9 26.533.9

    68.870.4

    78.3

    17.2

    83.9

    54.7

    126.4

    19.9

    91.1

    15.515.0

    17.713.4

    15.4

    Undrawn commitments Pan Africa

    Investment

    Holding Company

    Captives

    Other

    Captives

    Government

    Captives

    Financial Services

    Independents

    35.9

    25.8

    61.7

    29.8

    4.5

    5.3

    1.0Undrawn commitments (R35.3 bn)

    Invested (R91.0 bn)

    24.5

    26.7

    3.5

    30.4

    2.1

    1.6

    1.10.4

    Total unds under management by type as at 31 December 2012, split by undrawn commitments and invested (Rbn) 1

    1 Pan-Arican unds have an element o undrawncommitments that may be invested in South Arica

    or other unspecied Arican countries.

    A portion o the undrawn commitments is inclusive

    o a provision or uture management ees.

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    6 Highlights

    201220112010200920082007200620052004200320022001

    0.60.60.6

    1.2 1.3

    4.9

    2.3 2.2

    14.5

    15.4

    10.6

    3.6

    11.4

    0.21.1

    0.7

    4.2

    2.22.3

    0.0 0.0

    14.5

    0.0

    15.3

    0.1

    11.28.5

    2.1

    3.3

    0.3 0.2

    10.7

    9.9

    0.8

    Later stage

    Earlier stage0.5

    14.4

    13.9

    Third party unds raised during the year, analysed by und stage (Rm)

    0

    0

    0

    0

    0

    0

    62.0%

    10,8%

    15%

    0.0%0.0%0.6%

    11.6%

    56.2%

    14.2%

    8%

    3.8%

    7.9%

    13.9

    0

    20

    40

    60

    80

    45.4%

    2.4%

    5.4%

    5.1%

    8%

    21.3%

    12.3%

    46.0%

    6.2%

    7.8%

    5.1%2.1%

    21.2%

    11.5%

    South Africa

    United States

    UK

    Canada

    Middle East

    Other

    Europe excl. UK

    Funds raised

    during 2012

    Funds raised

    during 2011

    Funds raised

    to 31 Dec 2012

    not yet returned

    to investors

    Funds raised

    to 31 Dec 2011

    not yet returned

    to investors

    9.6%

    0.0%

    Geographic sources o third party unds raised

    2012201120102009200820072006200520042003

    25.4

    5.2

    5.31.51.9

    5.8

    10.5

    4.53.6

    7.0

    12.3

    12.0

    2.8

    10.1

    17.2

    14.8

    2.2

    12.3

    7.9

    22.7

    16.1

    14.0

    28.4

    7.8

    18.4

    35.1

    19.9

    16.3

    11.6

    23.8

    31.1

    12.1

    21.2

    15.38.4

    14.8

    27.440.8

    26.522.0

    Non-empowered/unclassified

    Captives Government

    Black influenced companies

    Black empowered companies

    Black companies

    39.339.7

    42.5

    59.2

    86.3

    109.4 105.4

    114.2

    9.1

    25.3

    32.2

    24.0

    23.9

    114.5

    4.7

    24.6

    36.5

    28.8

    31.8

    126.4

    Funds under management by BEE und managers at year end (Rbn)

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    KPMG and SAVCA Private Equity Survey 7

    201220112010200920082007200620052004200320022001

    2.0

    0.4

    2.41.4

    3.50.8

    4.31.8

    1.3

    6.4

    4.6

    1.5

    6.9

    1.4

    26.1

    8.2

    18.9

    2.9

    7.2

    5.6

    11.8

    Follow-on investments

    New investments2.13.5

    4.63.3

    5.4

    10.7

    4.3

    6.2

    8.8

    16.5

    7.7

    24.7

    5.0

    10.6

    5.6

    Cost o investments made during the year, analysed by new and ollow-on investments (Rbn)

    201220112010200920082007200620052004200320022001

    28.2

    1.01.5

    16.0

    20.4

    18.1

    8.8

    Vodacom disposal

    Funds returned to investors

    29.0

    2.4

    4.5 4.0 4.46.2

    2.0

    9.3

    25.7

    10.5

    Venfin disposal7.01.0

    1.5

    2.4

    4.54.0

    10.5

    6.2

    2.0

    25.7

    7.0

    Funds returned to investors during the year (Rbn)

    Private Equity annual investment by independents as a percentage o GDP (%)

    During 2012

    During 2011

    TurkeyPolandMENARussiaChinaJapanSSASouth

    Africa

    IndiaBrazilSouth

    Korea

    United

    States

    United

    Kingdom

    Israel

    2.06

    1.81

    0.78

    1.05 1.02

    0.86

    0.04

    0.22

    0.10

    0.18

    0.34

    0.14 0.140.10 0.09 0.09 0.10 0.08

    0.140.08 0.09 0.06

    0.010.05

    0.130.05

    0.100.04

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    8 Sources o inormation

    Sources of information

    The principal source o inormation or this survey was the survey questionnaire. In addition we have used

    the SAVCA Handbook, held discussions with certain private equity industry participants, as well as sourced

    public inormation on private equity unds, including international surveys.

    The survey questionnaire was developed jointly by KPMG in South Arican and a specially constituted

    SAVCA sub-committee.

    For clarity, the guidelines or participation in this survey are as ollows:

    Participants must:

    Include investments i they are made in South Arica, regardless o where they are managed rom;

    Have as their principal business the management o capital (third party and / or proprietary

    capital) or the provision o capital (equity or quasi equity) primarily to unlisted companies;

    Employ proessionals - dedicated to the management o the capital and the investments made

    using the capital (and capital rom other providers); and

    Aim to generate returns mainly through medium to long-term returns on investment and / or

    social development returns.

    We note that determining the level o private equity industry activity is not an easy task.

    Whilst certain parties lobby or a more inclusive approach to measurement, others believe

    that overstating the level o local activity is a disservice to the industry as this could

    possibly reduce the appetite o Development Financing Institutions (DFIs) and oreign

    investors to commit unds to South Arica in avour o other under-unded emerging

    markets. The purists also argue that this survey should only measure the activity o

    the independent unds, as these orm the core o the proessionally managed private

    equity industry both locally and globally. This, however, would negate the signicant

    role played by corporates, banks and DFIs in private equity in South Arica. For the

    purposes o presentation, and elimination i deemed necessary by specic users,

    we have presented data, wherever possible, split between the various types o

    und managers.

    Questionnaires were e-mailed to 126 (2011:95) entities that indicated that they

    would consider participating in the survey. 95 (2011:56) o them (representing

    102 unds (2011:73)) completed the questionnaire. In addition, alternative

    sources were used to obtain inormation on a urther 15 private equity rms,

    representing 15 unds, that did not complete the questionnaire. Although

    these alternative sources did not provide us with as much inormation as our

    questionnaire, we believe that the inormation is complete and understated,

    i anything.

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    KPMG and SAVCA Private Equity Survey 9

    Other empirical data has been sourced rom various sources, including:

    EMPEA Industry Statistics Fundraising & Investment Analytics 2012; Historical

    Statistics Since 2003; Perormance Data Q3 2012 Data as o 4 February 2013

    RisCura South Arican Private Equity Perormance Report Quarter ended:

    31 December 2012

    Statistics South Arica

    Zephyr a Bureau van Dijk product

    Other sources specically included in the ootnotes.

    In compiling the inormation or this survey, KPMG has worked closely with a SAVCA

    sub-committee, to try to ensure meaningul interpretation and comment has been

    included in this report. The sub-committee reviews the document prior to its public

    release, but does not have access to any o the individually completed questionnaires

    submitted to KPMG or any other inormation not presented in this publication.

    Although care has been taken in the compilation o the survey results, KPMG and

    SAVCA do not guarantee the reliability o its sources or o the results presented.

    Any liability is disclaimed, including incidental or consequential damage arising romerrors or omissions in this report.

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    10 Introduction to private equity

    Introduction to private equity

    The term private equity reers to shareholder capital invested in private companies,

    as distinguished rom publicly listed companies. Private equity unds are generally

    investment vehicles that invest primarily in enterprises which are not listed on a public

    stock exchange.

    An enterprise may seek private equity nancing or a variety o applications, rom

    increasing its working capital base in times o business expansion, developing new

    technologies and products to grow and remain competitive, making acquisitions o

    other businesses, to buying out certain shareholders to restructure the ownership and

    management o the business. Another vital application o private equity in South Arica is

    acilitating the introduction o BEE investment.

    The role o private equity

    Investments by private equity unds into companies hold great benets besides the

    mere cash eect to develop businesses. Private equity investments have considerable

    impacts in terms o productivity, skills development and job creation, as it includes the

    transer and exchange o know-how and not only the fow o capital. Private equity und

    managers play an active role in managing their investments in companies as they derive

    a return rom the increased valuation o their investments (not just debt repaymentand an associated interest rate) and hence ocus on business development or the

    companies they invest in.

    In South Arica the private equity industry represents a signicant sector within the

    overall nancial services industry, and an attractive asset class within the broader capital

    markets. As seen across a range o indicators, the prole o the local private equity

    industry is that o a productive contributor to the development o the South Arican

    economy. These contributions are detailed in The Economic Impact o Venture Capital

    and Private Equity in South Arica 2012 study, which is available rom SAVCA. In addition

    private equity acilitates BEE, addresses economic imbalances o the past, promotes

    entrepreneurial initiatives and positions South Arica to compete successully on the

    global stage.

    Through the use o leverage in certain transactions, private equity sponsors can assist

    in improving the capital eciency o their investee companies.

    As can be seen in this survey, private equity is an important source o Foreign Direct

    Investment (FDI), both indirectly via the raising o oshore money by local und

    managers but also by direct co-investment by oreign investors.

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    KPMG and SAVCA Private Equity Survey 11

    Investment stages

    For the purposes o this survey we have broadly classied private equity into three

    sub-classes, namely:

    venture capital

    development capital

    buy-out unding

    Figure 1: Private equity investment stages

    Private equity

    category

    Stage o business

    developmentTypical application

    Venture capital Seed capital Funding or research, evaluation and development o a concept or

    business beore the business starts trading.

    Start-up and early stage Funding or new companies being set up or or the development o

    those which have been in business or a short time (one to three years).

    Development capital Expansion and development Funding or growth and expansion o a company which is breakingeven or trading protably.

    Buy-out Leveraged buy-out or buy-in Funding to enable a management team or empowerment partner,

    either existing or new, and their backers to acquire a business rom

    the existing owners, whether a amily, conglomerate or other. Unlike

    venture and development capital, the proceeds o a buy-out generally

    go to the previous owners o the entity. Buy-outs are oten leveraged.

    Replacement capital Funding or the purchase o existing shares in a company rom other

    shareholders, whether individuals, other venture-backers or the public

    through the stock market. Unlike venture and development capital, the

    proceeds o replacement capital transactions are generally paid to the

    previous owners o the entity.

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    12 Introduction to private equity

    Development o private equity in South Arica

    Beyond being dened as a range o investment categories applicable to non-listed

    companies, private equity is also a distinct asset class within the broader capital market,

    and is supported by a well-dened industry made up o various players and stakeholders.

    The current prole o the private equity industry in South Arica is the result o various

    historical developments in the country and in global capital markets. In South Arica, theindustry was boosted by the large number o leveraged buy-outs and management buy-

    outs (LBOs and MBOs), resulting rom the widespread disinvestment o multinationals

    rom South Arica in the 1980s. These transactions were structured, nanced and

    managed by the major commercial, merchant and investment banks o the time.

    As these local banks developed the in-house expertise to manage private equity

    investments on an internally unded basis, there was a global trend, especially in the US

    and Europe (more specically the UK) towards the ormation and management o private

    equity unds whose capital was sourced rom third party investors such as pension

    unds, large corporations and other institutional entities.

    In South Arica the private equity industry beneted rom the global trend towards

    recognising the asset class as an attractive investment vehicle or investors, combined

    with its growing reputation as an eective means o economic development or

    Governments and development agencies. It may be argued that South Arica has one

    o the more sophisticated private equity industries among emerging and developed

    markets, with dierent unds at all stages o business development, rom start-up

    venture capital unds through to late-stage and buy-out unds.

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    KPMG and SAVCA Private Equity Survey 13

    Types o private equity frms

    A distinction needs to be made between captive and independent und managers.

    Fund managers include Independents who manage unds on behal o third parties

    as well as Captives who manage on-balance sheet investments that were unded by

    a parent or group oten rom an indeterminate pool o money. Captive unds are or

    the purpose o this survey urther classied into the captive unds o Government,

    nancial services (including banks and insurance companies) and other captive unds(including corporates). A urther category o unds were included in the 2011 survey

    or Investment Holding Companies 2

    Independent und managers raise cash commitments rom third party investors.

    Generally, in terms o the agreement between the third party investors and the private

    equity und manager, the private equity rm draws down on the commitments as and

    when investments are to be made. Independents are the dominant type o rm in

    the UK, the rest o Europe and in the US, where these unds are structured as limited

    partnerships. Private equity rms typically act as the general partner o the limited

    partnership, whilst institutions and other investors become limited partners.

    Unlike captive unds, independent unds are usually closed ended. This means that

    once a und has been raised, it is closed out, ollowing which no urther commitmentsare accepted rom third parties. Typically, third parties commitments expire, oten

    according to a time schedule based on a use it or lose it principle, once a maximum

    drawdown time period expires. Proessional private equity managers usually earn

    income rom a combination o a management ee based on total commitments plus an

    enhanced carried interest, which is based on the perormance o the und relative to a

    benchmark. Captive und managers usually do not charge any management ee.

    2 An investment vehicle that acts as a holding company

    by owning shares o other companies. Investment

    Holding companies typically do not have committed

    investable sources o capital rom third parties (as

    the case with Independents); and typically are able to

    have longer term investment holding periods 2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network oindependent member rms aliated with KPMG International Cooperative (KPMG International), a Swiss entity.All rights reserved. Printed in South Arica. MC10034

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    Black Economic Empowerment

    One o the notable eatures o South Aricas private equity industry is the very

    signicant role it plays in the development o BEE. The industrys impact on BEE is ar

    reaching, as detailed in the various sections o this survey. It is specically important to

    note that:

    The Codes o Good Practice or Broad-Based BEE (BEE Codes), issued by the

    Department o Trade and Industry (DTI), stipulate the conditions under which

    a company may treat its ownership arising rom a private equity und as i that

    ownership were held by black people. These requirements were nalised in June

    2007 and provide the industry clarity on how to urther increase its already signicant

    contribution on this vital socio-economic process. The requirements can be

    summarised as ollows:

    - More than 50% o any exercisable voting rights associated with the equity

    instruments through which the private equity und manger holds rights o

    ownership must be held by black people.

    - More than 50% o the prots made by the private equity und manger ater realising

    any investment made by it, must by written agreement, accrue to black people.

    - The private equity und manger must be a black-owned company, as dened in the

    BEE Codes.

    - Over a 10-year period, the private equity und must have more than 50% o the

    value o unds invested, invested in black-owned enterprises that have at least 25%

    direct black ownership.

    Private equity transactions enable higher gearing, whereby a combination o private

    equity investment and bank loans allow the implementation o an appropriately

    geared nancial structure, allowing management o the investee company to acquire

    a signicant stake in the company. This leveraged model also creates opportunities

    or the involvement o black management and other BEE parties in the ownership and

    management o the investee company.

    The vast majority o transactions concluded by the industry have a signicant BEE

    component and the majority o private equity und managers have a BEE element to

    their own shareholding structure.

    14 Black Economic Empowerment

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    16 Funds under management

    Funds under management

    The survey shows that South Aricas private equity industry now has a total o R126.4

    billion unds under management (inclusive o undrawn commitments o R35.3 billion).

    This is a R11.9 billion (10.4%) increase rom unds under management at 31 December

    2011 o R114.5 billion (inclusive o R30.6 billion undrawn commitments).

    The industry has achieved a compound annual growth rate o 11.6% o total unds under

    management (excluding undrawn commitments) since 1999 when the survey began.

    In analysing the research it is important to note that, only comparative 2011 inormation

    has been restated but not pre-2011 inormation. This is in order to take into account

    participants updated returns and also due to the inclusion or exclusion o unds that did

    or did not participate in the 2011 survey.

    Funds under management by Independents have increased total unds under

    management by R4.2 billion rom R57.5 billion at 31 December 2011 to R61.7 billion at

    31 December 2012.

    Captives-Financial Services total unds under management increased by R8.1 billion

    rom R21.7 billion at 31 December 2011 to R29.8 billion at 31 December 2012.

    General unds remain dominant, with more than two thirds o the unds under

    management at 31 December 2012 in the category o General/ No specic ocus

    (92.0%).

    Total undrawn commitments at 31 December 2012 are R35.3 bil lion (2011: R30.6

    billion), o which R25.8 billion (2011: R 23.3 billion) refects the undrawn commitments

    o independent und managers.

    Captives-Government and und managers that themselves black-owned, empowered

    or infuenced (that is, have at least 5.0% black ownership) had R94.6 bill ion at 31

    December 2012, a increase o 4.4% (2011: R90.4 billion).

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    KPMG and SAVCA Private Equity Survey 17

    Figure 2: Total unds under management

    2009 R105.4bn2010 R114.2bn

    2011 R114.5bn2012 R126.4bn

    24%

    Captives

    Government

    R30.4bn

    (6 firms)

    Captives Other

    R3.0bn (6 firms)

    Independents

    R61.7bn

    (47 firms)

    Captives Financial

    Services R29.8bn (13 firms)

    2%

    1%

    48,8%

    19%

    Captives

    Government

    R24.0bn

    (6 firms)

    Captives Other

    R10.3bn (10 firms)

    Independents

    R57.5bn

    (42 firms)

    21%

    1%

    50,2%

    21%

    Captives

    Government

    R21.1bn

    (4 firms)

    Captives Other

    R12.3bn (10 firms)

    Independents

    R54.8bn

    (55 firms)

    11%

    18%

    2%

    48,0%

    38%

    Captives

    Government

    R12.1bn

    (1 firms)

    Captives Other

    R5.3bn (7 firms)

    Independents

    R48.2bn

    (37 firms)

    11%

    5%

    45,8%

    Investment Holding

    Company

    R1.6bn (2 firms)

    Investment Holding

    Company

    R2.0bn (0 firms)

    24%

    9%

    Investment Holding

    Company

    R0.9bn (8 firms)

    Captives Financial

    Services R21.7bn (11 firms)

    Captives Financial

    Services R24.0bn (16 firms)

    Captives FinancialServices R39.7bn (10 firms)

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    18 Funds under management

    Figure 3: Composition o total unds under management

    201220112010200920082007200620052004200320022001

    13.3

    5.2

    7.1

    10.3

    35.9

    8.3

    6.2

    10.5

    37.0

    10.2

    5.2

    8.7

    39.3

    11.9

    5.8

    7.8

    39.7

    13.9

    7.0

    7.7

    42.5

    18.4

    10.1

    6.2

    59.2

    24.7

    12.3

    6.4

    86.3

    31.2

    14.0

    10.5

    109.4

    39.7

    12.1

    5.3

    105.4

    21.2

    Captives Other

    Captives Government

    Captives Financial Services

    Independents

    12.3

    2.0

    114.4

    12.0 15.2 14.2 13.9

    24.5

    53.7

    48.3

    54.9

    24.0

    30.4

    3.01.5

    126.4

    61.7

    29.8

    24.0

    10.30.9

    114.5

    57.5

    21.7

    42.9

    Investment Holding Company0.0 0.00.0 0.0

    0.0

    0.0

    0.0

    0.00.0

    Figure 4: Composition o total unds under management at year end by the ocus o

    the und (Rbn), includes Pan-Arican unds 3

    4.8 2.2-2.8

    23.9

    0.7

    92.0

    General/No specific focus

    ICT

    Infrastructure

    Real Estate

    Mining and Resources

    Other

    Mezzanine

    2012 R126.4bn

    3.1 2.5-2.8

    22.8

    0.7

    82.7

    2011 R114.5bn

    3 The total unds under management includes

    Pan-Arica unds who have an element o undrawn

    commitments that may be invested in South Arica

    or other unspecied Arican countries.

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    KPMG and SAVCA Private Equity Survey 19

    Figure 5: Total unds under management at year end, split by undrawn commitments and investments (Rbn) 4

    201220112010200920082007200620052004200320022001

    28.2

    7.7

    35.9 37.039.3 39.7

    42.5

    59.2

    86.3

    109.4

    105.4

    114.2 114.5

    7.9 13.8 13.816.0

    25.3

    31.6

    40.6 35.0

    35.9

    Undrawn commitments

    Invested

    29.1 25.5 25.9 26.5 33.9

    68.8 70. 4

    78.3

    30.6

    83.9

    126.4

    35.3

    91.1

    54.7

    Figure 6: Total unds under management by type as at 31 December 2012, split by undrawn commitments and invested (Rbn) 4

    Investment Holding

    Company

    Captives

    Other

    Captives

    Government

    Captives

    Financial

    Services

    Independents

    35.9

    25.8

    61.7

    29.8

    4.6

    5.3

    3.5

    1.1Undrawn commitments (R35.3 bn)

    Invested (R91.0 bn)

    24.5

    26.7

    10.2

    28.8

    2.1

    1.6

    1.10.5

    4 A portion o the undrawn commitments is inclusive

    o a provision or uture management ees.

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    20 Funds under management

    Figure 7: Total unds under management at year end, split by invested and geographical undrawn commitments (Rbn)

    201220112010200920082007200620052004200320022001

    28.2

    7.7

    35.9 37.039.3 39.7

    42.5

    59.2

    86.3

    109.3105.4

    114.2 114.5

    7.9 13 .8 13 .816.0

    25.3

    31.6

    25.0 20.0

    18.2

    Undrawn commitments South Africa

    Invested

    29.1 25.5 25.9 26.533.9

    68.870.4

    78.3

    17.2

    83.9

    54.7

    126.4

    19.9

    91.1

    15.515.0

    17.713.4

    15.4

    Undrawn commitments Pan Africa

    Figure 8: Classifcation o undrawn commitments by stage o investments (Rbn)

    20122011201020092008

    36.8

    3.7

    40.5

    35.0

    1.9

    35.525.2

    33.1

    Later stage

    Early stage

    35.9

    30.6

    0.4

    5.4

    30.1

    35.3

    5.2

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    KPMG and SAVCA Private Equity Survey 21

    Figure 9: Classifcation o undrawn commitments by type o und manager (Rbn)

    20122011201020092008

    28.1

    2.4

    2.1

    8.0

    40.5

    35.0 35.9

    11.2

    0.6

    9.6

    2.2

    0.5

    23.2 23.5

    Independents

    Captives Financial Services

    Captives Government

    Captives Other

    Investment Holding Company

    0.00.1 30.6

    5.5

    1.7

    23.0

    0.1

    0.2

    35.3

    5.3

    1.0

    25.8

    2.1

    1.1

    Figure 10: Composition o later stage, independent undrawn commitments by ocus o the und (Rbn) 5

    20122011201020092008

    12.7

    12.3

    0.30.4

    25.7

    21.1

    23.1

    12.4

    15.9

    General / No specific focus

    Mining and resources

    Other

    8.5

    0.30.0

    6.8

    0.4

    0.0

    18.0

    12.8

    4.5

    0.7

    0.0

    20.6

    12.9

    6.1

    1.6

    0.0

    Mezzanine

    5 A portion o the undrawn commitments is inclusive

    o a provision or uture management ees.

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    22 Funds under management

    Figure 11: Funds under management by BEE und managers at year end (Rbn)

    0

    0

    0

    0

    0

    2012201120102009200820072006200520042003

    25.4

    5.2

    5.31.51.9

    5.8

    10.5

    4.53.6

    7.0

    12.3

    12.0

    2.8

    10.1

    17.2

    14.8

    2.2

    12.3

    7.9

    16.1

    22.714.0

    28.4

    7.8

    18.4

    35.1

    19.9

    16.3

    11.6

    23.8

    31.1

    12.1

    21.2

    15.38.4

    14.827.4

    40.8

    26.522.0

    Non-empowered/unclassified

    Captives Government

    Black influenced companies

    Black empowered companies

    Black companies

    39.3 39.742.5

    59.2

    86.3

    109.4 105.4

    114.2

    9.1

    25.3

    32.2

    24.0

    23.9

    114.5

    4.7

    24.6

    36.5

    28.8

    31.8

    126.4

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    KPMG and SAVCA Private Equity Survey 23

    Comparison to the global market

    Although the South Arican private equity industry is small in comparison to those o the

    US and UK, it is well established and locally signicant.

    Using the available EMPEA inormation, but recalculating the South Arican

    percentages using the South Arican survey data, South Arica has Investment activity

    as a percentage o GDP or 2012 o 0.10% (2011: 0.14%). The calculation relates toinvestments made by Independents only in order to compare directly with the EMPEA

    data. South Aricas Private Equity Investment as a percentage o GDP is higher than

    China (0.08%) and Russia (0.06%), but behind Brazil (0.18%), India (0.14%). It is still

    some way o that o the United States (0.86%), the United Kingdom (1.05%) and Israel

    (1.81%).

    Figure 12: Private Equity annual investment by independents as a percentage o GDP% 6

    During 2012

    During 2011

    TurkeyPolandMENARussiaChinaJapanSSASouth

    Africa

    IndiaBrazilSouth

    Korea

    United

    States

    United

    Kingdom

    Israel

    2.06

    1.81

    0.78

    1.05 1.02

    0.86

    0.04

    0.22

    0.10

    0.18

    0.34

    0.14 0.140.10 0.09 0.09 0.10 0.08

    0.140.08 0.09 0.06

    0.010.05

    0.130.05

    0.100.04

    6 O the ve categories o unds used in the

    KPMG/SAVCA Survey, EMPEA only includes

    Independents. All captives, whether nancial

    services, government or other are excluded.

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    24 Funds under management

    The gure below uses EMPEA data or Russia/CIS, India, China and Brazil, with South

    Arican data collated rom the survey. This calculation relates to Independents only in

    order to compare directly with the EMPEA data.

    Figure 13: Emerging markets private equity und raising totals by select markets US$Rbn 7

    2012201120102009200820072006200520042003

    4.3

    2.1

    2.9

    0.20.2

    0.2

    0.50.30.70.20.4

    0.20.7

    1.5 2.1

    0.2

    2.2

    2.7

    1.3

    0.3

    6.7

    0.2

    2.0

    11.5

    2.5

    4.6

    3.9

    2.3

    15.1

    1.8

    3.6

    7.7

    14.5

    0.9

    1.1

    27.7

    0.4

    0.5

    6.6

    4.0

    0.4

    11.9

    7.5

    0.1

    3.3

    1.5

    13.5

    1.1

    7.1

    16.6

    2.7

    0.7

    27.3

    Brazil

    China

    India

    Russia/CIS

    South Africa

    0.1

    2.6

    10.8

    2.1

    1.0

    16.9

    0.4

    7 EMPEA Industry Statistics Fundraising &

    Investment Analytics 2012; Historical Statistics

    Since 2003; Perormance Data Q3 2012 Data as

    o 4 February 2013.

    South Arican totals are based on inormation

    supplied by the participants in the 2012 survey

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    KPMG and SAVCA Private Equity Survey 25

    The data tables below rom Zephyr have been updated to refect South Arican data as

    per this survey. The South Arican data includes the total investments or the 2012 year,

    but excludes Business Partners. Business Partners, which has many small deals, was

    excluded or comparative purposes as many o these smaller deals are not reported and

    thereore in all likelihood are not included in the comparative Zephyr data.

    Figure 14 : Country ranking 8

    Country Ranking - Deal Value during 2012(US$ million)

    1 United States O America 34 199 11 South Arica 1 177 21 Israel 367

    2 United Kingdom 12 247 12 Russian Federation 1 129 22 Luxembourg 289

    3 France 4 184 13 Spain 1 014 23 Belgium 287

    4 Sweden 3 098 14 Germany 910 24 Poland 285

    5 Brazil 2 823 15 Denmark 899 25 Japan 274

    6 Australia 2 176 16 Norway 758 26 Morocco 243

    7 Italy 2 085 17 United Arab Emirates 695 27 New Zealand 203

    8 India 1 346 18 Hong Kong 649 28 Indonesia 198

    9 China 1 298 19 Canada 478 29 Korea Republic O 125

    10 Chile 1 210 20 Cayman Islands 433 30 Ireland 122

    Figure 15: Country ranking 8

    Country ranking Number o deals during 2012

    1 United States O America 417 11 Italy 25 21 Ireland 7

    2 South Arica 164 12 Netherlands 20 22 New Zealand 7

    3 United Kingdom 141 13 Brazil 16 23 Austria 6

    4 France 130 14 Israel 15 24 Poland 65 India 60 15 Finland 14 25 Switzerland 5

    6 Germany 52 16 Australia 12 26 Japan 4

    7 Spain 43 17 Russian Federation 12 27 Turkey 4

    8 Canada 37 18 Belgium 11 28 Singapore 4

    9 Sweden 33 19 Denmark 11 29 Korea Republic O 4

    10 China 30 20 Norway 11 30 Portugal 3

    8 Inormation supplied by Zephyr, a BvD product.

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    26 Funds under management

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    KPMG and SAVCA Private Equity Survey 27

    The total o third party unds raised in 2012 increased by 34.8% rom R10.7 billion during

    2011 to R14.4 billion during 2012.

    The majority o reported und raising activity during 2011 (55.3%) and 2012 (59.9%) was

    by Independents.

    The major und raisers or 2012 were Ethos Private Equity, OMIGSA Alternative

    Investments and Vantage Risk Capital.

    In 2011 the major und raisers included Arican Inrastructure Investments Managers,

    Ethos Private Equity, OMIGSA Alternative Investments and Phatisa.

    O the total R14.4 billion raised in 2012, R6.3 billion (43.8%) was rom oreign sources.

    36.3.0% o all third party unds raised during 2012 were rom pension and endowment

    unds (2011: 40.7%). Government, aid agencies & DFIs accounted or 25.0% (2011:

    28.1% and Insurance companies 16.4% in 2012 (2011: 16.3%).

    South Arica contributed 56.2% o unds raised during 2012 (2011: 62.0%).

    Cumulatively, o the unds raised but not yet returned to investors, South Arica is the

    main source o und raising (46.02%), ahead o the UK (21.2%) and the US (11.5%).

    26.9% o cumulative third party unds raised and not returned to investors were romGovernments, Aid Agencies and DFIs as at 31 December 2012, ollowed by pension and

    endowment unds (20.7%) and Insurance Companies or Institutions (14.5%).

    Fund raising activity

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    28 Fund raising activity

    Figure 16: Third party unds raised during the year, analysed by und stage (Rbn)

    201220112010200920082007200620052004200320022001

    0.6

    0.6

    1.2 1.3

    4.9

    2.3 2.2

    14.5

    15.4

    10.6

    3.6

    11.4

    0.21.1

    0.7

    4.2

    2.22.3

    0.0 0.0

    14.5

    0.0

    15.3

    0.1

    11.2

    8.5

    2.1

    3.3

    0.3 0.2

    10.7

    9.9

    0.8

    14.4

    13.9

    0.4

    Later stage

    Earlier stage

    Figure 17: Source o third party unds raised during 2012 (Rbn)

    25.08

    Local source (R 8.1 billion)

    Foreign source (R 6.3 billion)

    CorporatesPrivate

    individuals

    Govt aid

    agencies& DFIs

    BanksPension &

    endowment

    Insurance

    companies

    Private Equity

    fund of funds

    2.3

    5.2

    3.6

    2.2

    2.4

    1 450

    0.5

    0.6

    3.3

    0.3

    0.30.1

    1 750.0

    3.3

    0.2

    0.2 0.0

    0.1

    4.7

    2.3

    0.6

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    KPMG and SAVCA Private Equity Survey 29

    Figure 18: Source o third party unds raised during 2011 (Rbn)

    25.08

    Local source (R 6.6 billion)

    Foreign source (R 4.1 billion)

    CorporatesPrivate

    individuals

    Govt, aid

    agencies &

    DFIs

    BanksPension &

    endowment

    Insurance

    companies

    Private Equity

    fund of funds

    0.6

    4.4

    3.8

    3.0

    3.8

    0.2

    1.7

    1 450

    0.3

    0.2

    0.5

    2.5

    1.7

    0.0

    0.0

    0.6

    0.0

    0.0

    2.5

    0.6

    0.5 0.40.0

    Figure 19: Source o third party unds raised to 31 December 2012 not yet returned to investors (Rbn)

    Local source (R 31.1 billion)

    Foreign source (R 36.6 billion)

    Other /

    Undisclosed

    Private

    individuals

    CorporatesBanksInsurance

    companies

    Pension &

    endowment

    Govt, aid

    agencies

    & DFIs

    Private

    Equity fund

    of funds

    1.5

    11 350

    5.8

    14.0

    6.6

    9.8

    2.4

    18.2

    1.7

    0.9 1.2

    11.1

    2.9494.6

    0.21.0

    9.7

    1.1

    5.7

    1.2

    16.5

    4.3

    9.7

    9.0

    0.8

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    30 Fund raising activity

    62.0%

    10.8%

    15.0%

    0.0%0.0%

    11.6%

    56.2%

    14.2%

    8.0%

    9.6%

    0.0%3.8%

    7.9%

    13.9

    0

    20

    40

    60

    80

    100

    45.4%

    2.4%

    5.4%

    5.1%

    8.0%

    21.3%

    12.3%

    46.0%

    6.2%

    7.8%

    5.1%

    2.1%

    21.2%

    11.5%

    South Africa

    United States

    UK

    Canada

    Middle East

    Other

    Europe excl. UK

    Funds raised

    during 2012

    Funds raised

    during 2011

    Funds raised

    to 31 Dec 2012

    not yet returned

    to investors

    Funds raised

    to 31 Dec 2011

    not yet returned

    to investors

    0.6%

    Figure 20: Geographic sources o third party unds raised

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    KPMG and SAVCA Private Equity Survey 31

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    32 Investment activity

    The reported value o private equity investments decreased by 35.8%% rom R16.5

    billion during 2011 to R10.6 billion during 2012. The total number o investments

    decreased by 53, rom 537 to 484 during the same period.

    New Investments during 2012 amounted to R5.6 billion (2011: R7.7 billion) and

    Follow-on Investments during 2012 amounted to R5.0 billion (2011: R8.8 billion)

    The overall average investment deal size decreased rom R30.7 million or the 2011 yearto R21.9 million during 2012. New investments average deal size decreased rom R21.2

    million during 2011 to R19.2 million during 2012 while ollow-on investments average

    deal size decreased rom R50.6 million during 2011 million to R26.2 million during 2012.

    In terms o the number o reported investments, Business Partners, classied as

    Captives-Other, was again by ar the most active investor in the South Arican private

    equity market, contributing 320 (66.1%) o the total number o reported investments

    made during 2012 (2011: 353, 65.7%), although 5.8% in terms o the cost o total

    investments made during 2012 (2011: 4.0%). Business Partners average deal size

    was R1.92 million in 2012 compared to R1.85 million in 2011.

    I Business Partners investments are excluded, the total average deal size during 2012

    increases to R60.9 million (2011: R86.0 million), new investments average deal size

    during 2012 decreases to R71.8 million rom R74.0 million during 2011 and ollow-on

    investments average deal size during 2012 decreases to R52.7 million rom R99.4

    million during 2011.

    Captives-Financial Services and Independents dominated investment activity by

    value during 2012. By number, Captives-Other has the largest number o deals, as

    this category includes investments made by Business Partners.

    O the investments made during 2012 classied into sectors, 13.3% were in the

    manuacturing sector, 27.5% in the Inrastructure sector and 2% in the mining and

    natural resources sector.

    Due to some large retail deals in 2007 and 2008 (House o Busby, Tiger Automotive,

    Edcon etc) on a cumulative basis the retail sector still represents 13.7% o unds

    invested as at 31 December 2012. Inrastructure comprises 16.6% o all unrealized

    investments at 31 December 2012, with manuacturing making up 22.7% and

    mining and natural resources 11.7%.

    The cost o investments into seed, start-up and early stage entities contributed

    9.3% o cumulative unrealised investments at 31 December 2012 (2011: 6.1%).

    This represented 16.3% o the number o investments at 31 December 2012

    (2011:18.3%), which is indicative o the proportionally smaller transaction values

    or the early stage types o deals.

    Buy-outs as a proportion o investments made by cost, decreased rom

    36.0% in 2011 to 31.4% in 2012.

    Investment activity

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    KPMG and SAVCA Private Equity Survey 33

    Figure 21: Cost o investments made during the year, analysed by new and ollow-on investments (Rbn) 9

    201220112010200920082007200620052004200320022001

    2.0

    0.4

    2.41.4

    3.50.8

    4.31.8

    1.3

    6.4

    4.61.5

    6.9

    1.4

    26.1

    8.2

    18.9

    2.9

    7.2

    5.6

    11.8

    Follow-on investments

    New investments2.13.5

    4.63.3

    5.4

    10.7

    4.3

    6.2

    8.8

    16.5

    7.7

    24.7

    5.0

    10.6

    5.6

    Figure 22: Number o investments made during the year, analysed by new and ollow-on investments (Rbn)

    201020112010200920082007200620052004200320022001

    534

    261

    795

    229

    178

    187

    227

    245

    235

    265

    150

    188

    651

    581

    627

    730

    806834

    723

    618

    547

    Follow-on investments

    New investments

    422 403 440

    503

    561

    458468

    359

    599

    537

    484

    174

    192

    363292

    9 For the 2009 year we have also excluded two investments, due to

    the lack o inormation on these investments other than enterprisevalue. These were the acquisition by Denham Capital o shares inan SA-based energy rm, Bio Therm Energy, with a transactionvalue o R1.5bn and the acquisition o a signicant shareholdingin Medi-Clinic Corporation by European based private equityund, Lehman Brothers Merchant Bank, with a transaction valueo R1.3bn* The investment by Brait (as an investment holdingcompany) in Pepkor and Premier Foods in 2011 or approximatelyR5 billion has also been excluded.

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    34 Investment activity

    Figure 23: Cost (Rbn) and number o investments made during the year, analysed by type o und manager

    0

    5

    0

    5

    20122011

    7.4

    1.3

    0.2

    3.4

    4.1

    4.8

    0.6

    16.5

    10.6

    2.0

    0.3

    0.5

    3.0

    20122011

    47

    13

    6

    5

    4

    537

    484

    338

    79

    57

    379

    93

    Captives Financial Services

    Independents

    Captives Other

    Captives Government

    Investment Holding Company

    Costofinvestments(Rbn)

    Numberofinvestments

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    KPMG and SAVCA Private Equity Survey 35

    Figure 24: Investments made during the year, analysed by sector 10

    During 2012

    During 2011

    M

    edia

    Telec

    oms

    Health

    care

    Services

    Information

    techno

    logy

    Banks,

    fina

    ncial

    services

    and

    insur

    ance

    Infrastructure

    Mining&

    naturalresou

    rces

    Manufacturing

    Entertainm

    ent,

    leisu

    re&

    tou

    rism

    R

    etail

    37.3%

    27.5%

    1.9% 2%

    7.4%

    13.3%

    2.7%

    5.1%6.1%

    18.5%

    8.8%

    2.2%

    0.4%0.6%

    3.2%3.2%

    1.6%

    5%

    0.4%0.9%

    0.1%0.8%

    10 14% (R1.5 billion) o investments made during 2012were classied in the other sector category or notclassied at all (2011: 37% / R6.0 bill ion). These havebeen excluded rom the above analysis.

    KPMG and SAVCA Private Equity Survey 35

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    36 Investment activity

    Figure 25: Unrealised investment portolio at year end, analysed by sector 11

    During 2012

    During 2011

    Entertainment,

    leisure&

    t

    ourism

    Telecoms

    Hea

    lthcare

    S

    ervices

    Infor

    mation

    tech

    nology

    Banks,financial

    servicesand

    ins

    urance

    Infrastructure

    Retail

    Manufa

    cturing

    Media

    Mining&

    naturalres

    ources

    16.7%

    15.6%

    11.7%

    13.7%

    24.3%

    22.7%

    14%

    11.7%

    -2%

    7.7%

    5.6%6.2%

    2.3%1.9%

    3.1%2.6%

    3.5% 3.8%

    2.1%1.5% 1.3%

    0.6%

    11 13% (R12.8 billion) o the unrealised investment portolioat 31 December 2012 was classied in the other sectorcategory or not classied at all (2011: 17% / R13.9 bill ion).These have been excluded rom the analysis shown.

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    KPMG and SAVCA Private Equity Survey 37

    Figure 26: Analysis o investments by stage based on cost o investments

    0

    0

    0

    0

    0

    0

    Investements

    made during2012

    Investments

    made during2011

    8.7%

    36.0%

    50.8%

    4.4%0.0%

    31.4%

    16.6%

    45.7%

    6.3%

    0.0%%

    15.214.3 13.9

    0

    20

    40

    60

    80

    100

    120

    Unrealised

    investementsat 31 Dec 2012

    Unrealised

    investments at31 Dec 2011

    12.9%

    31.8%

    49.1%

    4.9%

    1.2%

    36.2%

    9.5%

    45.0%

    7.8%

    1.5%

    15.214.3 13.9

    Seed Capital

    Start up and early stage

    Expansion and development

    Replacement capital

    Buyout

    Figure 27: Analysis o investments by stage based on number o investments 12

    0

    0

    0

    0

    0

    0

    0

    Investements

    made

    during 2012

    Investments

    made during

    2011

    Unrealised

    Investments at

    31 Dec 2012

    Unrealised

    Investments at

    31 Dec 2011

    7.6%

    18.8%

    57.5%

    16.0%

    0.0%

    19.6%

    7.6%

    60.1%

    12.6%

    0.0%

    15.2

    10.7%

    16.5%

    54.6%

    17.3%

    17.7%

    10.1%

    55.9%

    15.4%15.2 14.3 13.9

    Seed Capital

    Start up and early stage

    Expansion and development

    Replacement capital

    Buyout

    1.0% 0.9%

    12 Investments not classied by stage have been excluded.

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    38 Investment activity

    Figure 28: The fgure below provides an analysis o the largest reported private equity transactions in 2012

    Name oinvestment

    Equityprovider/s

    Debtprovider/s

    Total undingraised (Rm)

    Type oinvestment

    PE Fund'sequity interest

    Part osyndication

    BEE ownership(post deal)

    Waco Ethos & RMB

    Ventures

    Standard

    Bank

    > R 1 500 Replacement

    capital

    Controlling

    Interest

    Yes Black Infuenced

    Capitec

    Bank

    Public

    Investment

    Corporation

    Not

    disclosed

    R 825.0 Replacement

    capital

    5.3% No Black

    empowered

    company

    Trudon Trinitas

    Private Equity

    Partnership,

    RMB Corvest &

    Nodus Capital

    Investec R 740.0 Replacement

    capital

    35% Yes Black

    empowered

    company

    Serica

    Investment

    Holdings

    Trinitas

    Private Equity

    Partnership

    Investec R 200.0 Replacement

    capital

    50% No Not empowered

    Main StreetHoldings TrinitasPrivate Equity

    Partnership

    FNB R 140.5 Replacementcapital

    61% No Not empowered

    Staycold Ethos/

    Universal

    Industries

    Nedbank R 130.0 Replacement

    capital

    Controlling

    Interest

    No Not empowered

    Wekaba

    Engineering

    Medu Capital Standard

    Bank

    R 108.0 MBO Controlling

    Interest

    No Black

    empowered

    company

    Transaction

    Capital

    Ethos N/A R 95.2 Later stage

    expansion

    capital

    n/a No Not empowered

    Cerebos Investec Notdisclosed

    R 54.9 LBO Not disclosed No Blackempowered

    company

    Boxmore

    Plastics

    Investec Not

    disclosed

    R 52.8 Follow-on Not disclosed No Black

    empowered

    company

    * Capitalworks acquired Rhodes FoodGroup or an undisclosed amount

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    KPMG and SAVCA Private Equity Survey 39

    Figure 29: The fgure below provides an analysis o the Top 10 largest reported private equity transactions in 2011

    Name oinvestment

    Equityprovider/s

    Debtprovider/s

    Total undingraised (Rm)

    Type oinvestment

    PE Fund'sequity interest

    Part osyndication

    BEE ownership(post deal)

    Tracker Actis, MIC,

    RMB

    Nedbank,

    StandardBank, RMB

    R 3 900 Replacement

    capital

    40% Yes Black

    empoweredcompany

    Liberty Star OMPE Not

    Discolosed

    R 2 065 Replacement

    capital

    15% No Black company

    Universal

    Industries

    Ethos Nedbank R 1 300 LBO Controlling

    interest

    No Not empowered

    Kevro Ethos Nedbank R 850 LBO Controlling

    interest

    No Not empowered

    Lodestone

    Brands

    Standard

    Chartered

    Private Equity

    Not

    Discolosed

    R 300 Later stage

    expansion

    capital

    Not Discolosed No Not Discolosed

    Ariresh Group Standard

    Chartered

    Private Equity

    Not

    Discolosed

    R 232 Later stage

    expansion

    capital

    30% No Not Discolosed

    Ferro Industrial

    Products

    Investec Investec R 187 LBO Not Discolosed No Not empowered

    Vox Telecom Investec Not

    Discolosed

    R 172 LBO Not Discolosed No Black

    empowered

    company

    Teraco Treacle DBSA R 157 Early stage

    expansion

    capital

    Not Discolosed No Black

    empowered

    company

    Alexander

    Forbes

    Ethos Not

    Discolosed

    R 100 Replacement

    capital

    Not Discolosed No Black infuenced

    company

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    40 Analysis of BEE investments

    The cost o investment into entities that are at least black infuenced companies in

    2012 was R6.2 billion, a decrease o 22.7% rom 2011 levels. The number o BEE

    investments increased rom 183 during 2011 to 192 during 2012. These levels o

    activity, when compared to M&A activity in South Arica, refects that private equity

    BEE investments are an important element o the South Arican economy.

    The average black economic empowerment deal size in 2012 was R32.4 million

    compared to R43.0 million during 2011. These are investments into black owned,

    empowered or infuenced companies.

    Figure 30: Cost o BEE investments made during the year (Rbn) (excluding Captives - Government)

    2012201120102009200820072006200520042003

    1.7%

    2.9

    1.7

    0.0

    4.7

    0.3 0.61.1

    1.9

    0.1

    3.1

    1.2

    1.8

    3.6

    0.6

    0.5

    1.43.4

    6.1

    2.4

    11.8

    5.5

    1.7

    2.7

    2.5

    3.3

    8.5

    5.2

    2.4

    0.4

    8.0

    2.8

    1.1

    5.6

    5.0

    2.7

    13.2

    Black companies

    Black empowered companies

    Black influenced companies3.5

    0.9

    1.8

    6.2

    Figure 31: Number o investments made during the year (excluding Captives Government)

    2012201120102009200820072006200520042003

    26

    144

    15

    185

    51

    203

    268

    227

    52

    287

    251

    79

    341

    284

    74

    390

    70

    32

    16

    319

    233

    173

    49

    39Black companies

    Black empowered companies

    14

    8

    11

    18

    240

    150

    20

    209

    120

    53

    10

    183

    Black influenced companies119

    49

    24

    192

    Analysis of BEE investments

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    KPMG and SAVCA Private Equity Survey 41

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    42 Exits

    Exits

    Funds returned to investors decreased by R18.8 billion rom R25.7 billion during 2011

    to R7.0 billion during 201213.

    The value o disposal proceeds14 decreased rom R17.2 billion in 2011 to R3.2 bil lion

    during 2012. Disposals to trade sale was the most popular in value terms. Sale to

    another private equity rm or nancial institution was the next most popular method

    o disposal.

    The average proceeds per disposal have decreased rom R22.4 million in 2011 to

    R3.7 million in 2012.

    Figure 36 shows that the reported prot (proceeds less cost o investment) on disposals

    o R1.9 billion during 2012 was substantially lower than the R14.1 billion during 2011.

    The trade sale category was the main contributor in 2012 with R1.2 billion, however,

    or 2011 the sale to another private equity rm category with R10.3 billion was the

    largest contributor.

    The implied times money back multiple during 2012 was 2.9 times, signicantly lower

    than the 6.9 times reported or 2011 disposals.

    13 Included in the total o R11,3 billion or 2011 Sale toanother private equity rm or nancial institution isR5.2 billion resulting rom the purchase by Brait SE(listed investment holding company) o the interest heldby private equity unds in Pepkor Holdings Limited and

    Premier Group (Pty) Limited.

    14 Disposal proceeds exclude the proceeds on therepayment o preerence shares/loans, proceeds romdisposals or a nominal amount and dividend andinterest payments.

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    KPMG and SAVCA Private Equity Survey 43

    Total unds returned to investors

    201220112010200920082007200620052004200320022001

    28.2

    1.01.5

    16.0

    20.4

    18.1

    8.8

    Vodacom disposal

    Funds returned to investors

    29.0

    2.4

    4.5 4.0 4.46.2

    2.0

    9.3

    25.7

    10.5Venfin disposal

    7.0

    7.0

    25.7

    10.5

    6.2

    2.0

    4.04.5

    2.4

    1.51.0

    Figure 33: Proceeds o unds returned to investors during the year (Rbn) (Excluding Venfn disposal)

    During 2012 (R 7.0 billion)

    During 2011 (R 25.7 billion)

    Saletom

    anagementwith

    noequityinvolvmentof

    anotherfinancialinstitution

    Write

    -offsincluding

    salesforanominalfee

    Dividendsand

    in

    terestpayments

    Sh

    arebuy-backby

    po

    rtfoliocompany

    ListingorIPO

    Tradesale

    Saleoflistedshares

    Repaymentof

    preference

    shares/loans

    Other/Unspecified

    Saletoanother

    privateequityfirm

    orfinancialinstitution

    0.6

    11.3

    0.9

    4.9

    1.9

    3.1

    0.1

    2.2

    1.5

    1.9

    0.3

    0.8

    0.2

    0.7

    0.40.30.10.0

    0.9

    0.5

    Figure 32: Funds returned to investors during the year (Rbn)

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    44 Exits

    Disposals

    Figure 34: Analysis o disposals made during the year based on proceeds (Rbn) (excludes the Vodacom disposal during 2006 and

    the Venfn disposal in 2010)

    20122011201020092008200720062005200420032002

    28.2

    00.10.4

    0.3

    0.0

    0.8

    0.2

    0.5

    0.30.7

    1.9

    1.6

    0.0

    0.7

    0.6

    0.5

    3.4

    1.0

    3.2

    0.5

    0.3

    1.3

    0.1 0.01.00.5

    0.8

    0.8

    3.1

    0.1

    4.0

    2.9

    0.4

    1.7

    9.1

    0.31.4

    0.3

    2.7

    0.4

    0.1

    4.9

    0.1

    0.4

    0.1

    0.1

    0.1

    0.8

    65.91

    0.5

    1.6

    0.9

    0.2

    1.7

    4.8

    0.8

    11.3

    1.9

    0.3

    2.9

    17.2

    Share buy-back by portfolio

    company

    Sale to another private equity

    firm/financial institution

    Trade sale

    Sale to management

    (buy-back)

    Sale of listed shares and IPOs

    0.3

    0.6

    1.5

    0.40.3

    3.2

    Figure 35: Analysis o number o disposals made during the year based on proceeds (excludes the Vodacom disposal during 2006

    and the Venfn disposal in 2010)

    20122011201020092008200720062005200420032002

    35

    28

    3

    6

    0

    72

    16

    7

    4

    16

    105

    16

    78

    18

    2

    19

    133

    4

    129

    4

    28

    8

    85 86

    8

    617

    108

    90

    24

    11

    2

    8

    135

    62

    80

    42

    22

    90

    6

    5

    43

    62

    44 44

    11

    12

    9

    10

    86

    40

    11

    12

    4

    10

    77

    Sale to management

    (buy-back)

    Sale to another private equity

    firm/financial institution

    Sale of listed shares and IPOs

    Trade sale

    Share buy-back by portfolio

    company

    50

    16

    5

    7

    8

    86

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independent member rms aliated with KPMG International Cooperative(KPMG International), a Swiss entity. All rights reserved. Printed in South Arica. MC10034

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    KPMG and SAVCA Private Equity Survey 45

    Proceeds

    Cost

    Sharebuy-back

    byportfolio

    Saleoflistedshares

    Tradesale

    Saletoanother

    privateequityfirm

    orfinancialinstitution

    Total

    2.9

    1.0

    0.6

    0.3

    0.1

    0.2

    1.5

    0.3 0.3

    0.4

    0.1 0.1

    Saletomanagement

    (Buy-back)

    Figure 36: Proceeds and cost o investments made during 2012 (Rbn)

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independent member rms aliated with KPMG International Cooperative(KPMG International), a Swiss entity. All rights reserved. Printed in South Arica. MC10034

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    46 Exits

    Figure 37: Proceeds and cost o investments made during 2011 (Rbn)

    Proceeds

    Cost

    Sharebuy-back

    byportf

    oliocompany

    Saleo

    flistedshares

    andIPOs

    Tradesale

    Saletoanother

    priva

    teequityrm

    ornanc

    ialinstitution

    Total

    16.5

    2.42.2

    0.4

    11.3

    1.1

    1.9

    0.7 0.80.3

    0.1 0.1

    Saleto

    management

    (Buy-back)

    Write-os

    60 investments were written o during 2012, inclusive o sales or nominal amounts

    (2011: 32 investments). The net loss on these investments (cost less proceeds) was

    R175.6 million in 2012 (2011: R1.2 billion).

    Cancelled/expired unds

    R180,5 million (2011: R1.4 billion) o committed but undrawn unds at 1 January

    2012 were cancelled and/or expired during 2012 and are thus no longer available or

    investment by the und manager.

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independent member rms aliated with KPMG International Cooperative(KPMG International), a Swiss entity. All rights reserved. Printed in South Arica. MC10034

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    KPMG and SAVCA Private Equity Survey 47

    ANOTHER AWARD WINNINGINFRASTRUCTURE PROJECTPUT TOGETHER BY A TEAMTHAT IS VERY PASSIONATEABOUT AFRICA!

    FinancingAfricas

    future

    Harith General Partners congratulates

    SOCOPRIM for winning the Deal of the Year

    Award from the prestigious and authoritative

    Project Finance Magazine.

    Harith together with Bouygues Construction is proud to form partof a concession to build and operate the EUR 282 million Henri

    Konan Bdi Bridge in Abidjan, Cte dIvoire. This award winningPublic Private Partnership will empower the residents of Abijanand stimulate their economy, bringing regional prosperity anddevelopment. Another proud moment in African infrastructure

    development financing.

    No. 1 Chislehurston, 33 Impala Road, Chislehurston, Sandton, 2196South Africa | Pule Molebeledi +27 11 384 4000 Tunisia | Souleymane Keita +27 76 455 9197Ghana | Ernest Nyarko +27 73 039 4361 | [email protected] | www.harith.co.za

    Harith is an Authorised Financial Services Provider | Registration no. 31473

    Structuring TodayStrengthening Tomorrow

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    48 Perormance

    Performance

    Background

    Measuring the perormance o private equity unds on a consistent basis can be dicult

    as private equity investments valuations are, by their very nature, highly subjective.

    The overriding principle o the International Private Equity and Venture Capital Valuation

    Guidelines is to show a air valuation o investments to the investor. These guidelines

    were released during 2005 and adopted by the majority o global private equityassociations, including SAVCA and EVCA.

    Riscura Fundamentals, in conjunction with SAVCA, produce a quarterly South Arican

    Private Equity report. The reported returns over dierent time periods the returns as

    compared to listed entities are as ollows:

    Investments at latest valuation

    The disclosed 2012 valuation o unrealised investments was R107.6 billion, with a

    related cost o R99.9 billion.

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o theKPMG network o independent member rms aliated with KPMG International Cooperative(KPMG International), a Swiss entity. All rights reserved. Printed in South Arica. MC10034

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    KPMG and SAVCA Private Equity Survey 49

    15 SAVCA and RisCUra South AricanPrivate Equity Perormance Report Quarter ended 31 December 2012

    Figure 38: Returns over dierent time periods (ZAR) 15

    Times Money

    Time period Pooled IRR Realised Unrealised Total

    10 Year 20,6% 0,96 0,71 1,66

    5 Year 11,4% 0,62 0.80 1,42

    3 Year 17,6% 0,59 0.80 1,39

    Figure 39: Listed equity comparison (ZAR) 15

    CAGR

    Time period Pooled IRR ALSI TRI* FINDI TRI* SWIX TRI*

    10 Year 20,6% 18,0% 21,7% 20,2%

    5 Year 11,4% 8,8% 14,7% 10,7%

    3 Year 17,6% 14,9% 24,1% 17,8%

    * Listed index returns are beore ees

    ** SWIX only ormed in 2002

    TRI Total return to investors

    Figure 40: Unrealised investments at year end cost compared to valuation (Rbn)

    At 31 Dec

    2012

    At 31 Dec

    2011

    At 31 Dec

    2010

    At 31 Dec

    2009

    At 31 Dec

    2008

    At 31 Dec

    2007

    At 31 Dec

    2006

    At 31 Dec

    2005

    25.1

    17.0

    39.3

    25.1

    58.5

    36.4

    72.7

    56.5

    73.0

    75.7

    89.6

    78.3

    84.483.9

    Cost

    Latest valuation

    99.9

    107.6

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independent member rms aliated with KPMG International Cooperative(KPMG International), a Swiss entity. All rights reserved. Printed in South Arica. MC10034

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    50 Private equity investment proessionals

    Private equity investmentprofessionals

    The total number o investment proessionals employed in the Private Equity industry

    decreased rom 574 in 2011 to 500 in 2012. Private Equity unds in general did not

    replace their natural attrition leavers during 2012.

    The gure below illustrates that white males still make up just under hal o all private

    equity investment proessionals (2012: 45.8%; 2011: 49.3%). The second largest

    category is black males which contributes 14.6% o the total reported numbers at 31

    December 2012 (2011: 13.1%).

    Indian, coloured and black proessionals employed by the private equity industry

    decreased by 3 during 2012 to 180 (representing a decrease o 1.6%). By comparison,

    white proessionals decreased by 49 during 2012 to 273 (representing a decrease o

    15.2%).The proportion o these proessionals to the total number o proessionals

    increased rom 31.9% at 31 December 2011 to 36.0% at 31 December 2012.

    At 31 December 2012 16.7% o all proessionals were emales (2011: 17.9%)

    Number o proessionals 2012

    White Indian Coloured Black Not specied Total

    Male 229 48 14 73 40 404

    Female 44 13 4 28 7 96

    Total 273 61 18 101 47 500

    % Breakdown (% o total)

    Male 45.8% 9.6% 2.8% 14.6% 8.0% 80.8%

    Female 8.8% 2.6% 0.8% 5.6% 1.4% 19.2%

    Number o proessionals 2011

    White Indian Coloured Black Not specied Total

    Male 283 49 15 75 49 471

    Female 39 9 4 31 20 103Total 322 58 19 106 69 574

    % Breakdown (% o total)

    Male 49.3% 8.5% 2.6% 13.1% 8.5% 82.1%

    Female 6.8% 1.6% 0.7% 5.4% 3.5% 17.9%

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independent member rms aliated with KPMGInternational Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in South Arica. MC10034

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    KPMG and SAVCA Private Equity Survey 51

    2013 KPMG Services Proprietary Limited, a South Arican company and a member rm o the KPMG network o independent member rms aliated with KPMG International Coope


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