Private equity outlook for 2019 

The year 2019 will provide its fair share of challenges. 

The private equity market is an important source of funds for start-up firms, private middle-market firms, firms in financial distress, and public firms seeking buyout financing. It’s also a big driver of mergers and acquisitions (M&A) activity. 

The year 2018 was considered to be difficult considering increasing volatile financial markets, political and economic uncertainty and the scarcity in quality assets. There is a consensus that 2019 will be an equally difficult year but it will be also rewarding. 

Private equity professionals share their outlook for the market in 2019.  

 

Nhlanganiso Mkwanazi is the co-founder of private equity firm Medu Capital. The firm celebrates its 16th anniversary in January 2019.

“In terms of 2019, we expect the broader environment to continue to be challenging. Our country’s economic growth is expected to be still below the long-term average. Household incomes are under pressure. Government needs to consolidate its fiscal position. Whilst there’s good effort by the current government to attract and increase fixed investment spend, that will take some time to flow.

“We see the year as a period of consolidation for the country, especially with the upcoming elections [In South Africa]. The important work of improving the integrity of some of our most important institutions and a focus on some of our pressing issues as a country is encouraging, but it will take some time to realise the benefits, which I’m certain will come in the future.”
 

Tom Whelan is the global head of private equity based in London office of Hogan Lovells working on transactions across all areas.

“It's always hard to predict what any year will look like, but our current expectation is that globally we will continue to see a very active private equity market in 2019, driven by a continuing low interest rate environment and widespread availability of credit, and sponsors sitting on large piles of unspent capital. We also expect to see more secondary deals and a continued healthy environment for new funds being raised.”

“In 2018, the deal statistics showed that there was a trend towards fewer cross-border deals and a larger share of domestic deals, which may have been caused by the increased protectionism at national levels that we are seeing in the market. It will be interesting to see if this trend becomes even more pronounced in 2019 as national and international regulators/trading blocs closely scrutinise acquisitions involving foreign investors.”

“2019 will provide its fair share of challenges [Brexit and US-China trade tensions] which I would expect private equity sponsors to navigate these with their usual level of sophistication and have another good year.”

 

Tshego Sefolo, the CEO of Agile Capital, a private equity firm.

“2019 is likely to see an uplift in M&A activity both globally and in South Africa. In the South African context, this is largely as a result of excess capital available in the market which is seeking good quality asset. The 2015/16 year saw significant private equity capital being raised both locally and in the international markets. Most of this capital is still available for investment.” 

“From a Southern African Development Community (SADC) region and rest of Africa perspective, there is a clear investment case to be built around the rapid growth in population, urbanisation and the acceleration of big cities. Most of this is driven by the aggressive growth in Africa’s young population, hence the rapid urbanisation in most of these African countries. With this trend comes the increased need for infrastructure investment e.g transportation, electrification communication and housing. We are likely to see significant activity in the next five to ten years in these sectors, especially given that most of these sectors are already underdeveloped.”