Factors influencing exit decisions among South African private equity investors

Scholtz, Jan Andries (2017-03)

Thesis (MCom)-- Stellenbosch University, 2017.

Thesis

ENGLISH SUMMARY : Private equity plays an important role in financial markets and is a source of capital for many growing businesses. The private equity industry has seen significant growth both locally and internationally. The private equity investment process has a number of stages, with the ‘exit’ stage being the final stage. Although this stage is crucial for creating maximum value for investors, it is under-researched, especially in an emerging market context. Given of the practical significance of the research and the gap in academic literature, the researcher set out to investigate the factors that may have an influence on the exit decisions of South African private equity investors who invest in Africa, including South Africa. From the literature review it emerged that a number of factors were predicted to have an impact on the exit decisions of private equity investors in terms of the choice of exit timing, exit route or both. A conceptual framework was developed around these factors, and was tested empirically. A mixed-method research methodology was adopted in this study, making use of both qualitative and quantitative data collection and analysis methods. A survey questionnaire was developed and emailed to experts in the private equity industry to gather primary quantitative data. Due to an unsatisfactory response rate, qualitative data were also gathered by conducting in-depth semi-structured interviews with a sample of private equity industry. The quantitative data gathered were analysed using descriptive statistics. The rich qualitative data were analysed by means of in-depth thematic analysis. Firstly, it was found that the exit process is complex and is affected by a number of diverse factors. However, it was determined that the main factor influencing exit decisions is achieving the maximum exit price. A further finding was that South African private equity investors favoured trade sales, secondary sales and management buyouts as exit routes. The final main finding was that the timing of exits was crucial for creating maximum value for investors. Based on the results of the study, it is recommended that private equity fund managers carefully plan their exits, as to achieve the maximum exit price. It is also recommended that private equity investors become aware of the developmental impact that private equity can have, and adjust their investment objectives accordingly.

AFRIKAANSE OPSOMMING : Privaat ekwiteit speel ’n belangrike rol in finansiele markte en is ’n kapitaalbron vir heelwat groeiende besighede. Die privaat ekwiteitsbedryf het sowel plaaslik as internasionaal aansienlike groei beleef. Die proses van privaat ekwiteitsbelegging behels ’n paar stadiums, waarvan die beeindigingstadium die finale stadium uitmaak. Alhoewel hierdie stadium deurslaggewend is by die skepping van maksimum waarde vir beleggers, is dit onvoldoende nagevors, veral in die konteks van ’n opkomende mark. Gegewe die gaping in die akademiese literatuur was die navorser se vertrekpunt om die faktore te ondersoek wat moontlik die beeindigingsbesluite beinvloed van Suid-Afrikaanse privaat ekwiteitsbeleggers wat in Afrika en Suid-Afrika bele. Uit die literatuuroorsig het dit geblyk dat daar ’n aantal faktore is wat na verwagting ’n impak op die beeindigingsbesluite van privaat ekwiteitsbeleggers het vir sover dit die keuse van tydsberekening van beeindiging, beeindigingsroete, of albei betref. ’n Konseptuele raamwerk is om hierdie faktore ontwikkel en dit is empiries getoets. ’n Gemengde navorsingsmetodologie is vir hierdie studie gekies, wat sowel kwalitatiewe as kwantitatiewe dataversameling en -ontledingsmetodes gebruik. ’n Opnamevraelys is ontwikkel en aan kundiges in die privaat ekwiteitsbedryf ge-epos ten einde primere kwantitatiewe data te versamel. As gevolg van ’n onbevredigende reaksiekoers is daar ook kwalitatiewe data versamel deur die voer van diepgaande, semigestruktureerde onderhoude met ’n steekproef uit die privaat ekwiteitsbedryf. Die kwantitatiewe data wat versamel is, is aan die hand van beskrywende statistieke ontleed. Die kwalitatiewe ryk data is deur middel van ’n diepgaande tematiese ontleding gedoen. Eerstens is daar bevind dat die beeindigingsproses kompleks is en deur ’n hele aantal uiteenlopende faktore beinvloed word. Daar is egter vasgestel dat die hooffaktor wat beeindigingsbesluite beinvloed met die behaling van die maksimum beeindigingsprys te doen het. ’n Verdere bevinding was dat wanneer dit by beeindigingsroetes kom, Suid-Afrikaanse privaat ekwiteitsbeleggers voorkeur aan handelsverkope, sekondere verkope en bestuursuitkope gee. ‘n Finale en belangrike bevinding was dat die tydsberekening van beeindigings deurslaggewend is by die skepping van maksimum waarde vir beleggers. Gebaseer op die resultate van die studie word daar aanbeveel dat privaat ekwiteitsfondsbestuurders hulle beeindigings omsigtig beplan ten einde die maksimum beeindigingsprys te behaal. Verder word daar aanbeveel dat privaat ekwiteitsbeleggers bewus raak van die ontwikkelingsimpak wat privaat ekwiteit kan he en hulle beleggingsdoelwitte dienooreenkomstig aanpas.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/101230
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