While the infographic is about stock markets, the real story for us is about what this means for the private markets.

The absence of developed listed equities markets means private equity investors on the continent need to be far more forward-thinking and engaged when it comes to planning for and managing portfolio company exits.

A big part of our work is raising equity for our clients; when we do this, the topic of exits always comes up. There are three main options for a PE fund to exit:
1) Back to the original shareholders
2) To another fund
3) To a strategic

We have seen a number of deals struggle with exits as initially envisioned exit paths did not materialize. Exits to strategics, which is the preferred option, seem to be few and far between across sub-Saharan Africa (with the exception of South Africa).

In our view, too many funds merely hope that they are building something that will be of interest to strategics when they should be far more proactive in this regard.

This means that investment teams must engage potential strategics early in the investment lifecycle. Before the time to exit has come, PE funds should identify potential strategic buyers and engage them to understand how they think about acquisitions and what makes a potential acquisition more or less attractive. This feedback will likely inform growth plans and strategies, or even asset acquisitions; we recently worked on one divestment where a strategic passed on an opportunity because of the equipment the company had purchased.

In our view, assessing and engaging the strategic landscape should happen shortly after an investment is made. Doing this properly will take some uncertainty out of exits, but also speed up divestments, and lead to better returns.