Innovative private equity and venture capital investment growth
Hlayisani will manage its first fund, the Hlayisani Growth Fund as a single private equity fund blended with a small allocation to early stage revenue generating venture capital opportunities.
The Hlayisani Growth Fund will secure exposure in various industry sectors through a diversified pool of unlisted assets and temporary yield generating investments which may be listed. The targeted investment mix is as follows:
- Direct investments:
- 75% diversified private equity unlisted assets
- Primarily mid-market business (broadly, but not limited to, companies with enterprise values of R50m to R1bn)
- Individual investment size is expected to be, but not limited to, in the region of R10m to R100m.
- 25% diversified early stage revenue generating venture capital unlisted assets
- Temporary Investments:
- Where the Hlayisani Growth Fund has not fully deployed its investment capital it will make use of temporary yield generating unlisted and listed investments.
Hlayisani will be targeting the following returns:
- Target ROE of around 25%;
- Target EBITDA Margins above 10%;
- Strong revenue growth with a significant client base as well as potential for export revenue.
According to the South African Venture Capital and Private Equity Association Performance report, the South African private equity industry delivered a ten-year
return of 18.5% from 1 January 2005 to 31 December 2015. Hlayisani seeks to achieve its target return through a mix of traditional private equity and early stage revenue generating venture capital opportunities.
Given the focus on high growth innovative businesses, requiring capital to deliver the targeted growth, Hlayisani does not see a dividend distribution during the initial growth phases.
It should be acknowledged that high growth investments do carry a material element of risk, hence the higher than average targeted returns. Hlayisani will be targeting businesses with proven business models and technologies with high growth potential. In order to mitigate investment risk, the team will employ best practice due diligence procedures, implement corporate governance policies and practices, and take an active role in the measurement and management of strategy implementation for the businesses invested into.
Hlayisani will be investing in South African and African investment opportunities. As a result of this, there will be the risk of economic, political or social instability affecting South Africa or any African jurisdictions invested in. The Hlayisani investment team has extensive knowledge and access to networks in the jurisdictions invested into and will wherever possible take the necessary precautionary measures during the due diligence before investing into a target asset to safeguard the investees. It is noted that all risk cannot be mitigated and forms part of the risk associated with this high return-seeking investment company.