New private equity firm opened in Ethiopia, Ascent Capital, is set to finance local businesses including newly established businesses. It is the second equity firm in Ethiopia, following SGI.
Ascent is based in Mauritius and it officially opened its office in Ethiopia’s capital Friday, January 23, 2015. According to Licas Kranck, managing partner, Ascent managed to raise USD 50 Million intending to invest it in Uganda, Kenya and Ethiopia. He explained his company is committed to invest USD 20 Million in Ethiopia in the coming three years. Yet this subject alteration and could be raised ten time in three years time.
The fund is going to make investments in mid-size companies with minimum revenue of USD Two Million. “This could go as high as USD 10 million. We will have a ten-year lifetime to exist,” Kranck said.
The fund’s aim is to work for ten years with a possible extension of two years. It projects to repay the money to the investors within a decade and then exit from the market.
Explaining about Ascent, Kranck said; “It is equity capital; it is not debt. We share the risk and the reward. We invest between USD 2-5 million per company. If everything goes well, which we hope it will, then we share the reward but if things do not go well we share the risk as well. And, of course, we target good dynamic Ethiopian entrepreneurs and there are many of them in this country.”
Factors that drew the investors to Ethiopia are the fast economic growth the nation is recording, its political stability and huge population, principal and country director of Ascent Capital, Michael Mebaselassie, explained.
He added the company is keen to finance manufacturing companies that produce fast moving consumer goods. “We are mainly interested in manufacturing companies whose products could be distributed to the majority of the population. We are trying to identify promising companies. We want to maintain strong relationship. It is a long- term commitment. We are not here to fly in and out,” he noted.
The equity firm is interested to engage in agro processing companies. Kranck further explained this and said the company is keen to invest in agro processing companies such as dairy farms, juice makers and slaughter houses.
Other than agro processing the company also aims to get involved in the medical service sector. This includes hospitals and medical laboratories. It already has partnered with a medical laboratory found in the capital city, International Clinical Laboratory (ICL).
The managing partner is of the opinion that it takes from three to six months to get to know a business and make an investment. He analogizes it to marriage and say, “It is like a marriage you spend a little time dating before getting married”.
When investing in a company Ascent needs a controlling stake. According to Michael Ascent intends to have from 35 to 40 percent share from the company it is investing in. Yet this is subject to negotiation.
The equity firm called onto Ethiopian enterprises to come forward and work together. “We encourage Ethiopian entrepreneurs to reach us. Private equity is quite new in Ethiopia. But in the early stage for companies that do not have access to bank financing this is a good opportunity. Let them come to us and discuss things. Once you have the equity capital on the balance sheet then you can reach out to the banks and get more financing. So we encourage people to come and talk to our Ethiopian staff,” Kranck said.
According to The Reporter Ascent Capital was established two years ago and got committed for the fund a year ago. It has 25 shareholders among which notable ones are, Norwegian Fund (Norfund), Austrian government fund (OeEB), European families and East African institutions, such as pension funds and insurance companies. Among the hareholders, Norfund is largest investor while OeCB is the second highest investor in the equity firm.
Source: The Reporter
