The prices private equity firms pay for stakes in African companies are the highest in six years, driven by record fundraising and competition for the continent’s expanding middle class.
The median price for buyouts in 2015 increased to more than seven times the ratio of a company’s value to its earnings before interest, depreciation, tax and amortization, compared with 5.4 times in 2012, Cape Town-based RisCura Solutions (Pty) Ltd. said in a report on the industry released Wednesday.
“Industries serving consumer staples and discretionary spending fetch the highest prices because of favorable demographics in the growing middle class,” Rory Ord, head valuations at RisCura, said by phone. “High growth expectations, fierce competition and decreased risk perception contribute to higher sale amounts.”
Private-equity companies amassed $4.3 billion for investments opportunities in Africa last year, the most in six years, with investors attracted to consumer-facing companies as improvements in access to financial services and mobile technology open up markets.