Metier, the Southern African private equity firm, held the final close for its second fund in mid-September, raising R2.8 billion, (approximately US$ 203 million at current exchange rates), for the ten-year investment vehicle. The fund will target growth capital opportunities in entrepreneurial mid-cap businesses in South, Southern and Sub-Saharan Africa.
Metier Capital Growth Fund II is denominated as two pools of capital – one in US dollars and the other in South African rand – which will jointly invest in opportunities sourced from sectors which demonstrate significant market growth potential. A total of fourteen investors committed capital to the fund raise, eight of whom are re-upping from Metier’s prior funds.
As we reported earlier, the capital was raised from a broad range of institutions – development finance institutions, fund-of-funds as well as a range of South African pension funds and other asset managers. The fund aims to deliver returns in line with the track record of Metier’s team, namely a 36% IRR and 2.6x money (in South African Rand, gross).
In aggregate, MCGF II will likely invest in a total of between eight and twelve companies, focusing on businesses that are set to benefit from the rising consumer demand of Africa’s middle class or those companies that are well-placed to gain from the increased investment in infrastructure services as well as the growth in intra-regional and international trade.
As part of the fund’s strategy, Metier’s investment team will look to achieve exposure to Sub-Saharan Africa ex South Africa from 50% of the assets. This will be done by pursuing what’s termed a ‘look through’ approach, whereby the investments will be made in South African-based companies that are well-positioned to expand into the rest of the continent. By leveraging the experience and skills of both its South African investment team and portfolio company management teams, the firm will be very effective at generating deal flow, accessing new markets and ultimately building value in the companies it backs.
Typically, the fund aims to execute transactions that will average R250 million or US$18 million in size, taking either control or minority stakes in their target investments. To date, 30% of the fund’s capital has been deployed in 4 investments – Astrim, L&B, Retailability and Southey – each of which operate in one of the fund’s preferred industry sectors. These include transport and logistics, retail, healthcare, FMCG, agri-processing, infrastructure services and education.