kpmg private equity survey 2013

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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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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

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 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

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 5

201220112010200920082007200620052004200320022001

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5.2

7.1

10.3

35.9

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