Alterra Capital, Carlyle’s discreet successor, sets its sights on African deals

It is the story of employees who took over the company they work for. The story of a retreat that is not really a retreat. In May 2020, when the US investment fund manager Carlyle Group decided to take some distance from its main fund dedicated to Africa, the management of its assets were taken over by the team that had been running it since 2014.

At stake was $700m in assets, a plethora of partnerships, the 10 or so companies that make up its portfolio and more than 10 years of experience on the continent.

When KKR, another US private-equity giant, decided at the end of 2017 to abandon the continent – by selling its assets to Sun European Partners – its desires for rapid returns on investment did not coincide with the pace of its returns in Africa. Carlyle, on the other hand, chose another path a few years later. It decided to withdraw from its direct investments, while keeping one foot on the ground.

It is doing so, in part, via its Carlyle International Energy Fund vehicle, which is partly focused on Africa. But above all, Carlyle is handing over the management of the Carlyle Sub-Saharan Africa Fund (CSSAF) to Alterra Capital Partners, the investment company created by its former managers to oversee its assets on Carlyle’s behalf, while retaining ownership.

A smooth transition

According to Genevieve Sangudi, former managing director of CSSAF and now a partner at Alterra Capital, “the separation was amicable and the two structures maintain a strategic partnership.” This Tanzanian-born American, speaking on the sidelines of the AVCA 2021 annual meeting, has 12 years of experience of investing on the continent and does not feel ready to draw a line under this experience.

How did the transition go? What strategy is now being applied? After almost a year of experience, which was marked by the Covid-19 pandemic, she says that the fundamentals have been preserved. “For our investors, the conditions remain the same. It is the same team that raises funds, then invests and manages them,” says Sangudi. “The only change is that now the whole thing is done by an independent management company.”

The team, alongside Sangudi who is based in Johannesburg, includes Bruce Steen, who was also behind the launch of the CSSAF. Other partners include Idris Mohammed, former managing director and a partner at the CSSAF. This former member of the pan-African private-equity firm DPI is based in Alterra Capital’s second office in Lagos. Eric Kump, a former partner at Carlyle and head of the CSSAF, is currently based in London.

Abacus, Access Bank, Assala Energy…

The 13 companies that make up the CSSAF’s portfolio are all now managed by Alterra Capital. According to Sangudi, four exits are in the pipeline, but these were decided ahead of time when the fund was launched.

This portfolio is quite varied. It ranges from agribusiness to healthcare, financial services and technology, media and telecoms. Among Alterra Capital’s major assets is Abacus, which was acquired from AfricInvest by Carlyle in September 2018. This Ugandan manufacturer and distributor of pharmaceutical products operates throughout East Africa.

Alterra Capital also manages stakes in the number-one ranked Nigerian bank Access Bank and the diversified group ETG, which is mainly active in the agribusiness industry. Carlyle/Alterra Capital is also behind the Gabonese oil and gas junior company Assala Energy, Nigeria’s Wakanow (online travel bookings) and the pan-African rating agency Global Credit Ratings.

And although the health crisis has thrown the new fund’s short-term plans into disarray, this past year has demonstrated the strength of the Alterra Capital founders’ project.

Backed by one of the world’s largest investment management firms (with nearly $250bn in assets) and benefiting from its extensive network, the former CSSAF managers have had no trouble staying the course. For example, Abacus doubled its revenue in 2020 compared to 2018, when Carlyle acquired a stake in the Ugandan company, which was then generating $9m in earnings before interest, tax, depreciation and amortisation.

Investments of at least $20m

“We learned the first lessons of the pandemic. Our responses were effective and rapid, and we will not hesitate to reproduce the actions we have deployed, in the event of a crisis as well as in a normal situation, to boost performance,” says Sangudi.

So it seems that the “Carlyle way” is here to stay at Alterra Capital. As are its ambitions, which stem from the appetite of a global investment giant. Therefore, just like with the CSSAF, Alterra Capital’s minimum investment is $20m, and it targets companies in the “upper middle” market, with the objective of acquiring a majority stake – or a co-investment – thereby giving it the capacity to influence the strategic decisions of the acquired company.

While waiting for the next exits, which are to be made to “strategic buyers”, Alterra Capital’s teams are working to enhance the value of Carlyle’s African portfolio. Without trying to make a name for themselves and attract the limelight, but by “giving a satisfactory return on investment to our investors, while ensuring that the companies in our portfolio are stronger when we exit,” says Sangudi.