Despite the flux in many African markets over the past few years, the number of PE-backed IPOs in both African and global stock exchanges have remained relatively constant. 

This is according to the African Private Equity-backed IPOs, released by African Private Equity and Venture Capital Association (AVCA), in conjunction with PricewaterhouseCoopers (PwC).

Over the 2010-2017 period, PE-backed IPOs generated over $3bn, contributing 16%, in terms of volume and 23%, in terms of value to total IPOs, according to the findings.
 
Enitan Obasanjo-Adeleye, Director, Head of Research, AVCA, said: “IPOs are rarely used for African PE exits, with investments more often being exited via trade sales and through transactions to other financial buyers.” 

“This can be attributed to fragmented regulation, political uncertainty and capital markets that need to be further developed. AVCA supports regulatory development to encourage IPOs for PE backed companies in Africa, notably the Kenyan Capital Markets Authority’s recent initiatives,” he said.

Within the report, the Johannesburg Stock Exchange remains the most attractive exit destination for PE-backed IPOs, in terms of value and volume, with nine IPOs worth $1.869bn between 2010 and 2017. 

Outside Africa, the London Stock Exchange remains the preferred destination for PE exits from African portfolio companies, with the second largest IPO proceeds of $600m.
 
The study also reveals the low free float of PE-backed IPOs, suggesting PE firms tend to progressively exit their investments. In terms of performance, Sub-Saharan Africa PE-backed IPOs outperformed their North African counterparts over a one-year time horizon, with an average increase from offer price of 27% compared to 0%. 

This may be due to economic impacts and macro volatility over the period considered in the study.
 
The study also provides evidence of the growing attractiveness and potential businesses targeting Africa’s middle classes, as highlighted by the large share of healthcare, consumer goods and financial services IPOs, which raised $1.1bn, $544m and $458m, respectively.

Ziad Oueslati, Vice Chair, AVCA & Co-Founder and Managing Director, AfricInvest, said: “The consistency of PE backed IPO exits in Africa is welcome news, despite the challenges emerging markets have faced over the past few years. Further developing an enabling environment that encourages investors' commitment, is key to driving more African PE exits on both African and international stock exchanges.”