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Exiting Private Equity Investments in

Nigeria
Chidi Odoemenam
Commercial Lawyer | Senior Associate at Rendeavour,
Alaro City

August 10, 2018

While private equity firms are focused on working with companies to help
them achieve their full potential by revitalizing operations, hiring talented
industry executives to impart their experience on the operations of the
portfolio companies, private equity investors have been said to have a
typical investment horizon of 5-7 years and usually plan to exit the portfolio
company after making a substantial profit on their investment.

According to information provided by the Africa Private Equity and

Venture Capital Association (AVCA), between 2012 and 2017, Nigeria
recorded a total of 112.14 private equity deals amounting to $7.8 billion.
South Africa raised $2.8 billion while Kenya’s private equity deal value
amounted to a total of $1.17 billion. In terms of deal volume, South Africa
recorded more deals by volume at 207.32 surpassing Nigeria’s 112.14 and
Kenya’s 100.8.

According to a research published by AVCA, Nigeria accounted for 42%

of all private equity exits by number in West Africa from 2010 to 2016. The
research states that there were 83 PE exits in West Africa over the period,
and Ghana and Côte d’Ivoire followed afterwards at 17% and 14%
respectively. Key exits highlighted include Actis’ sale of Ikeja City Mall to
HyProp and Attacq in 2015 and ECP’s exit from Continental Reinsurance.

Exit Strategies

There are various exit strategies private equity investors can use to exit
their investment as discussed below:

Initial Public Offer (IPO)

PE investors can procure the listing of the portfolio company’s shares on

the Nigerian Stock Exchange (NSE) and divest to incoming investors. Only
public companies who have obtained the approval of the Nigerian

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6/13/24, 1:55 PM (17) Exiting Private Equity Investments in Nigeria | LinkedIn
Securities and Exchange Commission (SEC) and complied with the listing
requirements of the NSE can list on the NSE.

Trade Sale/Strategic Acquisition

PE investors may sell all of their shares in the portfolio company to a third
party or an existing minority shareholder for cash consideration or equity
in another company. However, where the divestment would amount to a
change in control of a company with a value of about N500 Million, the
prior approval of the SEC would be required. Sector-specific laws may also
require the prior approval of the regulatory agency prior to the
consummation of the acquisition.

Scheme of Arrangement

PE investors may utilize the scheme provisions under the Nigerian

Companies and Allied Matters act to wound up the portfolio company and
transfer the assets of the portfolio company to a different company for
cash or share consideration. The scheme would require SEC and Federal
High Court sanction. This would convenient for a portfolio company
wholly owned by the PE investor.

Management Buyout

PE investors seeking to exit their portfolio company can sell their equity
stake in the portfolio company to the existing management team of the
company. This is an attractive option for both the management team and
the investors. The management buyout would follow the procedure in the
SEC Rules and would require the approval of the SEC.

Secondary Buyout

PE investors may also sell their stake in the portfolio company to another
private equity firm or financial sponsor in a transaction known as
secondary buyout or sponsor-to-sponsor buyout. The PE investor may
believe that a new financial sponsor can add value to the portfolio
company as it progresses to the next development stage.

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Paul O Erubami and 32 others · 2 comments

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Joel Joshua • 1st 5y

Legal and Contract Manager | Energy & Environmental Law

This is a great read Chidi!

Like · 1 Reply · 1 Reply

Chidi Odoemenam • You 5y

Commercial Lawyer | Senior Associate at Rendeavour, Alaro City

Thank you!

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6/13/24, 1:55 PM (17) Exiting Private Equity Investments in Nigeria | LinkedIn

Chidi Odoemenam
Commercial Lawyer | Senior Associate at Rendeavour, Alaro City

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