Bulls n Bears Entrepreneurship Zone :: Due Diligence: ‘A good company doesn’t necessarily mean a good deal’

[Bulls n Bears]

 <mailto:info at bulls.co.zw> 


 


 

Private equity firm Mediterrania Capital Partners focuses on growth markets
in Africa. It invests in countries characterised by consumption-driven
economies, pro-business policies, rapid urbanisation, favourable
demographics and growing consumer classes.

In this interview, Albert Alsina, CEO and founder of Mediterrania, talks
about the untapped opportunities for private equity investors in Africa and
explains why a good company is not always a good deal.


1. What is the greatest investment lesson you’ve learnt?


An important lesson we’ve learnt is that a good company does not
necessarily mean a good deal. Having a good business on the table is key,
but making sure that you are paying the right price, the deal has the right
structure, the exit strategy is clear and has been set up in alignment with
the entrepreneur, etc. is even more important. Being able to differentiate
between a good company and a good deal is crucial in any kind of investment
in private equity.

Another important lesson we’ve learnt is that having full alignment with
the promoter regarding the exit strategy and liquidity events before signing
the deal is very important in order to ensure that they happen at the agreed
time and your firm delivers good and timely returns to the investors.


2. Identify an untapped opportunity for private equity investors in Africa.


There are many untapped opportunities for private equity investors in
Africa. For example, we usually find companies that are strong leaders in
their country but which need strategic, operational and financial help to
expand internationally. These businesses can greatly benefit from private
equity investors’ operational expertise and market knowledge.

In terms of sectors, education and financial services offer huge
opportunities. There is an increased demand for high-quality educational
institutions from the growing middle class in Africa, which is still not
being fulfilled and is set to continue. The financial services sector, too,
is clearly underserved in Africa, and private equity can help to boost it
considerably.

Last year we invested in Groupe Cofina, a meso-finance institution in West
and Central Africa. Cofina helps entrepreneurs and small and medium
enterprises to obtain medium- or long-term financing. Thanks to our support,
Cofina is developing new products and services appropriate for these types
of customers, whose needs have outgrown microfinance institutions but whose
entrepreneurial structure is still considered insufficiently formal by
traditional commercial banks.


3. What is the biggest misconception about your job?


The biggest misconception is that Africa is one continent and can be
managed as such. In fact, Africa is a patchwork of 54 highly diverse
countries with different languages, cultures, political contexts, economic
development levels, working styles, customer demands, legal regulations,
etc. Private equity firms need to be very strict with their choice of
countries and companies in which to invest. Private equity firms operating
in Africa need to have a strong understanding of the micro- and macro
economics of the different countries and be capable of undertaking a
thorough financial analysis of each potential investment. All of the legal
aspects are very important, too. We must not underestimate the different
worlds that exist within Africa.


4. Name the one deal you wish you invested in.


I can’t think of a deal we would have liked to invest in. Once, though, we
invested in a company that performed extremely well and exited it a few
years later with very good returns. In hindsight, we maybe could have kept
it for a little longer, continued to work on it and perhaps sold it for a
higher price.


5. Describe the skills needed to succeed in Africa’s private equity
industry.


Firstly, I believe that you need a team with a strong in-depth local
knowledge of the focus countries and their industries and players, economic
and political aspects, market trends, etc. Then, as a private equity firm,
you must apply a strong diversification strategy by country and by sector.
Next, you must be disciplined in your investment strategy and meticulous
when analysing the potential investments. Finally, in terms of deal-making
and value creation, of course, you must invest in companies that are good
deals, not just good companies … and ensure that you have the exit strategy
and liquidity events well defined and fully agreed before the deal is
signed.—Howwemadeitinafrica



Albert Alsina

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.

 

 

Invest Wisely!

Bulls n Bears 

 

Telephone:   <tel:%2B263%204%202927658> +263 4 2927658

Cellphone:      <tel:%2B263%2077%20344%201674> +263 77 344 1674

Alt. Email:    <mailto:info at bulls.co.zw> info at bulls.co.zw  

Website:
<http://www.google.com/url?q=http%3A%2F%2Fwww.bulls.co.zw&sa=D&sntz=1&usg=AF
QjCNH8LYgdY55h-XKseuM8Kpr-JKdfhQ> www.bulls.co.zw 

Blog:
<http://www.google.com/url?q=http%3A%2F%2Fwww.bulls.co.zw%2Fblog&sa=D&sntz=1
&usg=AFQjCNFoIy6F9IXAiYnSoPSgWDYsr8Sqtw> www.bulls.co.zw/blog

Twitter:                 @bullsbears2010

LinkedIn:              Bulls n Bears Zimbabwe

Facebook:
<http://www.google.com/url?q=http%3A%2F%2Fwww.facebook.com%2FBullsBearsZimba
bwe&sa=D&sntz=1&usg=AFQjCNGhb_A5rp4biV1dGHbgiAhUxQqBXA>
www.facebook.com/BullsBearsZimbabwe

Skype:                  Bulls.Bears 



 

 

-------------- next part --------------
A non-text attachment was scrubbed...
Name: winmail.dat
Type: application/ms-tnef
Size: 229294 bytes
Desc: not available
URL: <http://listmail.bulls.co.zw/pipermail/bulls/attachments/20190424/f8f4fde2/attachment-0001.bin>