Title: What drives private equity investments returns - evidence from African investments

Authors: Eymen Errais; Baha Gritly

Addresses: Laboratoire de Recherche en Economie Quantitative du Développement (LAREQUAD), Tunis Business School, University of Tunis, BP 65, Bir El Kassaa, 2059 Tunis, Tunisia ' Tunis Business School, El Mourouj 3, Bir El Kassaa, 2059, Tunis, Tunisia; AfricInvest, Immeuble Integra, Centre Urbain Nord, 1082 Tunis, Tunisia

Abstract: This paper explores private equity return drivers in African countries. We focus on factors driven by macroeconomic, industry, and deal-level data instead of the classic investees fundamentals. This research uses a comprehensive dataset covering 242 deals closed between 1995 and 2020 in 194 companies, operating in 24 African countries, across 14 funds. Our paper shows that exit routes, co-investments, and cash-out structures have a positive impact on returns, while debt usage, firm experience, and ticket size have a limited role in driving returns. In terms of external factors, GDP growth has a positive impact on returns, while business environment variables are found to have a limited impact. The sector effect on returns has also been found to be significant, further reinforcing the importance of sector allocation as a performance driver in private equity.

Keywords: private equity; PE; internal rate of return; IRR; emerging markets.

DOI: 10.1504/IJESB.2022.126723

International Journal of Entrepreneurship and Small Business, 2022 Vol.47 No.2/3, pp.305 - 322

Received: 04 Jun 2021
Accepted: 22 Dec 2021
Published online: 03 Nov 2022 *

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