CDC is investing $20 million in Solon Capital Holdings, an investment holding company based in Sierra Leone. The transaction is the development finance institution’s first investment in a permanent capital vehicle, a reflection of the fact that the standard ten-year private equity model does not always meet the needs of those African markets in which longer-term capital is required to build strong businesses.
CDC now owns an undisclosed equity stake in Solon Capital Holdings, which has four active investments currently operating in Sierra Leone, Liberia, Guinea and Côte d’Ivoire. These include Flash Vehicles, now one of the region’s largest vehicle renting, leasing and fleet management companies, and Rising Academies, a rapidly-expanding operator of schools. In addition to growth prospects, financial performance and ultimately financial returns which are expected to be earned from dividends and exits at the holding company level, in common with its other investments, CDC evaluated the deal on its ability to positively impact local economies and deliver strong environmental and social performance.
Murray Grant, CDC’s Managing Director of Intermediated Equity led the deal for CDC, supported by colleagues Gozie Chigbue and Marvin Bell. As part of the deal, CDC will have a seat on both Solon’s Board of Directors as well as its Investor Advisory Board. The development finance institution is Solon’s first institutional investor and will support the company’s ongoing fundraising efforts as well as providing additional capital, if required, in the future.
“Businesses in Sierra Leone face great challenges in raising the capital they need to grow,” said Murray Grant in the statement announcing the investment. “Solon’s management team has shown that it is possible to successfully grow businesses over the long-term using a different model from traditional private equity. We’re excited to support Solon as they bring their creativity to new businesses and make their existing companies regional champions; delivering growth, jobs and impact in the region.”
It’s expected that CDC will make additional investments in permanent capital vehicles, complementing its well-established funds strategy. The DFI will target opportunities across the continent, especially in more economically-volatile markets and sectors, where traditional investment fund models could be less effective in supporting the growth of businesses.
O’Melveny and PwC provided CDC with advisory services for the transaction. Solon Capital Partners was advised by Herbert Smith Freehills.