Destination Africa: V&E Partners Shaun Lascelles and Simon Rootsey on What PE Firms Need to Know About Exits on the Continent

“Off the back of the Vivo Energy IPO, we would expect to see more private equity firms realistically look at IPOs for African-focused businesses —especially those that are pan-African in focus.”

The initial public offering of Vivo Energy in May 2018 was at the time, and remains, the largest UK-listed African IPO since 2005. V&E Partners Shaun Lascelles and Simon Rootsey have been supporting the Vivo Energy growth story from Day 1.

Back in 2011, Lascelles and Rootsey advised energy and commodities company Vitol and private equity firm Helios Investment Partners in their acquisition of 80% of most of Shell’s downstream businesses in Africa (and then the subsequent buy-out of Shell’s remaining 20% stake a few years later). Those assets would become Vivo Energy, the licensee of Shell gas stations in many markets in Africa, with more than 1,800 service stations in 15 countries.

Lascelles and Rootsey’s work with Vitol and Helios Investment Partners in relation to Vivo Energy culminated in their acting for the pair in an IPO that valued Vivo Energy at £1.98 billion.

In the interim, Lascelles and Rootsey, who joined V&E’s London office in 2016, have been busy counseling their private equity firms and investment fund clients on a range of cross-border M&A and other transactions, with a particular focus on emerging markets. As investor interest in Africa has grown in recent years, and given V&E’s historical very strong Africa practice, many of their deals have been centered on the continent.

Lascelles and Rootsey recently shared their thoughts on the Vivo Energy IPO, the current environment for PE exits in Africa (particularly in light of the Vivo Energy IPO), and what PE firms should consider as they plan their exits.

What were some of the factors that led to the successful IPO of Vivo Energy?

Vivo Energy is a truly pan-African business (unlike most of the other African IPOs in London that had assets concentrated in one or two countries) and had great support from a unique sponsor set: Vitol, one of the world’s leading energy trading houses, and Helios Investment Partners, one of the largest African-focused private equity firms.The support of these two sponsors, and their extremely strong management team, resulted in an excellent growth story for Vivo Energy, and enabled investors to invest in a large and truly pan-African business.

What were some of the ways V&E helped in achieving a successful exit from Vivo Energy?

From Day 1, we’ve been focused on the ability for Vitol and Helios Investment Partners to cleanly exit Vivo Energy—this focus has covered not only the usual legal issues associated with contractual arrangements, but also ensuring that business issues identified throughout the life cycle of the investment have been dealt with to a UK-listed company standard. This was always with a view to ensuring that an IPO (albeit relatively rare for an African-focused business the size of Vivo Energy) was a realistic and achievable exit strategy.

According to a report by the African Private Equity and Venture Capital Association and EY, IPOs comprised just 4% of PE exits in Africa in 2017. In contrast, selling to private equity firms and other financial buyers accounted for 37% of exits.

Are you seeing any signs of renewed interest in public offerings in Africa?

4% of PE exits in Africa in 2017 were IPOs.

Off the back of the Vivo Energy IPO, we would expect to see more private equity firms realistically look at IPOs for African-focused businesses —especially those that are pan-African in focus. We also expect it will make sponsors more inclined to grow businesses via M&A pre-exit in order to expand the number of African markets that they operate in (and thereby reduce the concentration of political and regulatory risks in one or two particular African markets).

What are some of the inherent risks of investing in Africa?

These have been pretty well documented, but for large and complex African businesses the key is stakeholder management – this covers a company’s relationships with (i) key regulators, (ii) relevant governments, (iii) employees, and (iv) the communities in which the business operates. Stakeholder management and being a strong corporate citizen is especially important in jurisdictions that do not have the most developed regulatory/legal framework.

In light of those risks, what are some of the key legal issues PE firms should consider when thinking about exits in Africa down the road?

PE firms should be seeking to run their businesses from Day 1 to UK-listed company standard—this is especially the case in relation to establishing and maintaining robust corporate governance, legal and accounting policies and procedures.

You both advised Helios and Vitol in the deal that led to the formation of Vivo Energy. How did it feel to see Vivo Energy go public?

The original deal was one of the most complicated we’d worked on. It was great to see that the complexity was ultimately extremely beneficial to a successful exit seven years down the line!