Private equity in Africa is entering a new strategic era as firms face mounting pressure to deliver returns in tougher market conditions, according to FTI Consulting’s 2025 Private Equity Value Creation Index.
The survey of more than 500 global private equity decision-makers shows multiple expansion is no longer a reliable growth driver. Rising interest rates, extended holding periods, and valuation pressures mean cost-cutting is insufficient. Value creation has become critical.
While mergers and acquisitions (M&A) remains a core tool, the index found it to be the weakest lever, with over half of respondents saying it took more than a year to realise expected value. African PE firms are now rethinking their playbooks across execution discipline, smarter M&A, and exit readiness.
In South Africa, where deal flow remains steady but operational maturity lags, outperformers are those moving from unfocused growth to targeted execution, commercial precision, and tech-enabled scale.
Redefining value creation
Technology and IT are the most used and effective levers, with 84% of respondents applying them regularly and 77% rating their impact as above average. Yet technology was also cited as the top execution challenge at portfolio level.
Commercial levers such as pricing optimisation, AI, and sales and marketing remain underused, with fewer than 30% of firms deploying them frequently.
“There’s a clear gap between ambition and execution. Success will come to firms that embed technology and growth levers into how businesses operate, scale, and deliver value,” says Lars Faeste, EMEA chair at FTI Consulting.
In Africa, where labour laws and unions limit headcount reductions, cost-cutting offers little.
“Firms are adopting execution-led value creation, targeting efficiency, revenue growth, product innovation, new markets, and acquisitions that enhance scale. The aim is not just returns, but sustainable business growth that supports job creation and broader economic development,” says Rishanth Pillay, head of sponsor-leveraged finance at Investec.
At Kamva Investments, technology now plays a central role in due diligence, speeding execution, and improving accuracy, says managing director Alupheli Sithebe. “A disciplined due diligence process is critical, particularly in today’s challenging economic climate where return margins are thinner.”
For Metier, growth capital rests on four levers – stakeholder partnerships, operational improvement, capital structure optimisation, and ESG integration. “Execution discipline has become a hallmark of our style,” says Trishanta Dheepnarayan, director and principal in the Capital Growth team. “We co-develop a 100-day plan and five-year roadmap with management, tracked weekly. Technology is a consistent enabler, from Enterprise Resource Planning and real-time sales tracking to e-commerce and automation.”
Mid-market portfolio firms have seen strong results from underused levers such as working capital optimisation, centralised sourcing, pricing discipline, and strengthening mid-tier management. Digital enablement and analytics now underpin scalable growth platforms, she says.
Sithebe says revenue growth, balance sheet optimisation, and asset efficiency are assessed pre-investment, while expansion may involve R&D or bolt-on acquisitions.
Wiehann Olivier, partner and fintech & digital assets PE lead at Forvis Mazars SA, says sales force effectiveness is becoming a differentiator. “We’ve seen marked improvements when sales teams are supported with digital lead-gen tools, proper training, and clear accountability,” he says.
Scaling up, balancing returns and exits
Execution, systems, and agility underpin scale-ups and exits, says Rowan de Klerk, CEO at The CFO Centre. “Execution is everything. Strategy means nothing if no one owns the action.”
Systems and forecasts provide visibility, while agility protects momentum. “Processes, capable people, and funding reserves form the backbone of scale-up success,” he says.
Sithebe calls exit planning “the proverbial moment of truth”. While Kamva is evergreen, it plans with exit eventualities in mind, setting timelines early.
“Early and deliberate exit planning is now essential. Mapping the buyer universe has become part of pre-investment due diligence, with some firms cultivating buyer relationships years in advance,” says Dheepnarayan.
De Klerk stresses valuation discipline. “If your valuation rests on shaky assumptions, it’s garbage in, garbage out. Models must be stress-tested, otherwise you risk working towards the wrong target.”
Firms are extending holding horizons by up to 50% to absorb delays while still targeting internal rate of returns, says Olivier. “Managers are embedding value-creation strategies earlier, focusing on operations, governance, and recurring revenue. Exit planning now starts sooner, with trade sales, secondary buyouts, and joint ventures all considered.”
M&A challenges
FTI’s Index shows 67% of respondents take over a year to realise expected M&A value. Governance and regulatory hurdles often delay deals.
Dheepnarayan says African PE transactions rarely close quickly, sometimes taking up to 12 months. “It’s critical to manage expectations early to mitigate risk and avoid deal fatigue.”
Shrinking fund sizes, extended timelines, and limited exit routes have increased reliance on structured and blended finance. “Those able to execute exits on time will be best placed for future fundraising,” she says.
Sithebe says detailed planning with regulatory experts and early engagement has improved regulatory outcomes. Still, lengthy closings often lead to renegotiations and added costs. To address this, firms are adopting extended long-stop dates, earn-outs, and scenario planning.
Competition Commission scrutiny has become a major hurdle. “Its uneven decisions in landmark deals add cost, delay, and complexity. The result is a subdued investment climate,” Sithebe says.
While Dheepnarayan notes some of her firm’s approvals have been relatively quick, Olivier points to delays of six to nine months in sectors such as telecoms and consumer goods. “Predictability and efficiency matter. Opaque processes discourage repeat capital flows.”
Rise of smart bolt-on M&A
Sponsor-backed platforms are increasingly using bolt-ons to scale operations, enter markets, or enhance products, says Pillay. Buying suppliers or distributors (vertical deals) improves efficiency while buying competitors (horizontal deals) strengthens market position and exit value.
Banks offer flexible financing for smaller bolt-ons, while larger transactions require reassessment of serviceability and security. Consolidation is especially attractive in fragmented sectors like fibre, now ripe for acquisition.
Blended finance demand rises
Demand for blended finance is growing, particularly among smaller fund managers. It also provides liquidity, allowing funds to exit assets while still capturing portfolio growth.
“Banks play a key role, designing hybrid solutions that mix equity, mezzanine, and senior debt to support acquisitions or delayed timelines,” says Pillay.
Safeguarding competition and public interest
Competition Commission spokesperson Siyabulela Makunga says competition lowers entry barriers, pushes incumbents to innovate, and benefits consumers through better products at competitive prices.
Benjamin Meadows, partner at CoxYeats, says the Commission now weighs competition and public interest equally, especially protecting jobs and promoting ownership by historically disadvantaged persons. “Structuring deals to mitigate these concerns early can ease the merger process,” he says.
Makunga says public interest provisions address South Africa’s unjust past and ongoing market concentration. Between 2019 and 2025, these conditions enabled R16 billion in historically disadvantaged person transactions, R60 billion in worker ownership deals, and R130 billion in support for small and black-owned firms.
“Predictability is key. The Act sets clear frameworks, including deadlines for intermediate mergers. To provide clarity, the Commission issued new public interest guidelines in March 2024 and continues publishing notes to guide practitioners,” he adds.
KEY TAKEAWAYS
What parties need to know about merger filings
Meadows says there are two key points for parties considering a merger filing. First, preparation and lodging require close cooperation, often continuing after filing as the Commission raises queries or sets conditions. Second, preparation is time-consuming, as market knowledge must be translated into the Commission’s legal framework.
Key considerations include:
- Cooperate fully and prepare for post-filing queries.
- Filing takes time; translate business insights into legal terms.
- The Commission cares about market impact, not identities.
- Operational overlaps invite scrutiny, the whole acquirer group counts.
- Agree terms early, public interest-friendly structures speed approval.
- Phased deals enable urgent actions pre-approval.
Mergers assessed over the past five years
In the past five years, the Competition Commission assessed 1 364 mergers.
Size of mergers
In 2020, 2021, 2022 and 2024, ≥50% of cases were completed in less than 40 days. In 2023, >50% of cases were completed in less than 60 days. In 2020, 2021 and 2024, more than 90% of cases were completed in less than 60 days. In 2022 and 2023, more than 90% of cases were completed in less than 80 days.
Common exit mistakes and when to plan
De Klerk says founders often start exit planning too late, focusing on the deal rather than groundwork such as due diligence readiness, clean financials, and aligning priorities to value drivers. Many also fail to grasp which levers influence enterprise value, weakening their negotiating position.
He argues PE-backed firms should plan from day one. “Always build your business to sell and build it like a franchise,” he says, citing The E Myth Revisited. Realistically, an exit takes three to five years, closer to five, to free the founder, build an independent team, and position the company to attract the right buyers at the right value.
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