PE fund lines up Sh3bn deals after merger with Ghana firm

Kenya’s private equity firm InReturn Capital is set to merge with Ghana’s Fidelity Capital Partners to create a new entity that will invest up to Sh3 billion in East Africa from next year.

The two firms will combine their operations by March and rebrand to Jacana Partners, which has stakes in both firms.

Jacana is the single largest shareholder in InReturn, having a 26 per cent stake in the PE firm.

Jacana Partners plans to raise $75 million (Sh6.3 billion) by year-end, with half of the money to be invested in small and medium-sized businesses in East Africa.

The new money will be raised from development finance institutions like UK’s CDC Group, Norway’s Norfund, and African Development Bank that are keen on financing growth of SMEs on the continent.

“The merger gives us an opportunity to grow our investments and regional presence in Sub Saharan Africa,” said Simon Merchant, the CEO of London-based Jacana Partners.

“We see opportunities for growth in Sub Saharan Africa because of the fast economic growth and high demand for consumer demand from the rising middle class in these markets,” he said.

In Kenya, InReturn has invested in Hurlingham Eye Care Services and Horizons Office Limited, with the company making investments of between Sh85 million and Sh425 million per company.

Following the merger, Jacana Partners plans to venture into two more markets in Africa to add on to their presence in Kenya, Tanzania, Uganda, Ghana, Liberia, and Sierra Leone.

The regional market has attracted more PE firms and DFIs seeking double-digit returns on the back of rapid economic growth.

More than 10 private equity (PE) funds targeting Kenya and the East African region have been formed in the past two years, in a period which development finance institutions (DFIs) have also stepped up their activities.

READ: Kenya leads E Africa in private equity funding

Some of the new East Africa-focused PE funds that have been established in the past two years are Batian Fund, Fusion African Access, Rift Valley SME Fund 1, and Catalyst Principal Partners.

CDC, a UK development finance institution, has announced a new Sh840 million fund dubbed Progression Eastern African Microfinance Equity Fund that will invest in microfinance institutions in Kenya, Tanzania, Rwanda, Zambia, and Uganda.

The influx of funds has raised the competition for acquisition targets, a move that has seen valuations of local firms rise faster than the rest of the East Africa.