July 19, 2024 at 4:00 AM GMT
Former Bridgewater Associates LP partner Richard Okello’s Sango Capital Management is acquiring a majority stake in an African private equity fund managed by Synergy Capital Managers Ltd. Sango Capital plans to explore potential exits from assets predominantly located in Nigeria.
Instead of a traditional purchase price for the increased stake, the parties have agreed to share future proceeds from the successful sales of the fund’s remaining assets, including companies like Viathan Engineering Ltd., according to Sango Investment Director Christian Roelofse, who did not disclose the fund’s value.
Initially, Synergy raised over $100 million for the fund, primarily targeting investments in Nigeria and Ghana, West Africa’s largest economies.
Nigeria has struggled with severe foreign-exchange scarcity and instability due to lower crude oil production and a lack of economic diversification. Since June 2023, when President Bola Tinubu’s government implemented policy changes to attract foreign inflows, the local naira currency has depreciated by about 70% against the dollar.
The primary challenges for private equity investors in the region include currency risk, illiquid and small domestic capital markets, and limited options for selling or listing companies, Roelofse explained.
“In the current economic climate, force-selling these assets would not yield their full value,” Roelofse said. “It might be better to enhance the businesses’ value and sell them under more favorable conditions in a year or two.”
The lack of international buyers for African assets has led to delayed sales, he added.
“Sango buys out investors who have stayed in these funds longer than initially intended, providing them with a cleaner exit sooner,” Roelofse said, noting that Sango aims to pursue more transactions of this nature.