(Ecofin Agency) - Ecofin Agency: Could you provide a summary of your current fundraising efforts? We've observed significant involvement from development finance institutions (DFIs) on this initiative. How close are you to achieving your fundraise target for this fund?

Christophe Scalbert: We are currently advancing the fundraising for Adenia Capital V, our fifth investment vehicle focusing on Africa. As of now, we've successfully raised $420 million and anticipate reaching our hard cap of $460 million within the next few weeks. This progress affords us a clear outlook on achieving this milestone shortly. Our investor base is diverse, spanning Europe, North America, and Africa, including significant contributions from DFIs. Historically, we've maintained a balanced mix of 50% DFIs and 50% private capital, a ratio we aim to preserve in this round of fundraising.

One notable aspect of Adenia Capital V's fundraising is the high rate of returning Limited Partners (LPs), demonstrating their trust and loyalty in our ventures. This is particularly gratifying for us as it underscores the enduring relationships we've built over the years. Institutions like the European Investment Bank (EIB) and Proparco have been pivotal, doubling their investment in Adenia V compared to the previous fund, which speaks volumes about our long-standing partnership.

Additionally, we are placing significant emphasis on engaging private African capital, especially targeting pension funds in Eastern and Southern Africa. This strategy aims to enhance the presence of African private investors, including family offices and pension funds, in our investor mix. Such efforts are geared towards fostering a robust ecosystem of private funding within Africa, enhancing the continent's investment landscape.

Ecofin Agency: Given the recent challenges faced by private capital markets in Africa, including the impacts of COVID-19, the ramifications of the Ukraine conflict, and the ongoing crisis in the Middle East, investor confidence in emerging and frontier markets has notably waned. In your view, what strategies have proven most effective in attracting a diverse range of investors to Africa's private capital scene?

Christophe Scalbert: Our experience at Adenia has shown that a robust track record of financial returns and impactful investments plays a crucial role in reassuring investors. Demonstrating consistent performance over time signals to investors that we can deliver on our promises. Furthermore, the unwavering adherence to our investment strategy since our inception in 2002 has been pivotal. Our approach has always been to acquire controlling stakes in businesses, allowing us to directly influence their operational and strategic direction. This strategy has been applied across 32 deals, underscoring our commitment to a hands-on, locally based approach. Our presence on the ground, with a comprehensive network of offices across Africa, enables us to work closely with management teams, thereby adding value and making timely decisions.

Investors, particularly those in Europe, appreciate this buyout approach, recognizing us as a specialized private equity firm with a focus on Africa. The control we maintain over our investments allows us to drive value creation, appoint key talent, and, importantly, determine the timing and strategy for exits. This level of control provides us with flexibility and independence in generating liquidity for our Limited Partners (LPs), a significant advantage in the African private equity landscape.

Moreover, our control-centric strategy aligns seamlessly with our commitment to generating impactful outcomes. This approach ensures accountability and intentionality in our impact objectives, covering areas such as environmental, social, and governance (ESG) issues, gender equality, and greenhouse gas emissions. Our ability to influence and implement these initiatives directly is a testament to our dedication to creating not only financial but also societal value.

Engaging with investors in today's environment requires patience and a heightened emphasis on the processes we've established for reporting and compliance. Nonetheless, by presenting a coherent narrative backed by a solid track record, we've been able to navigate these challenges successfully. Our approach illustrates the importance of control, strategic clarity, and impact in attracting and retaining investors in Africa's private capital markets amidst uncertain global conditions.

Ecofin Agency: Regarding your investment approach, you've highlighted the significance of controlling ownership as a core strategy. Could you elaborate on what characteristics define an ideal target company for you, particularly in terms of size and developmental stage?

Christophe Scalbert: Our investment focus is on sectors displaying positive macroeconomic trends, such as healthcare, renewable energy, and consumer goods. While we maintain a sector-agnostic stance, our primary criterion for investment is the potential for a change of control. We seek opportunities where our involvement goes beyond mere capital provision, targeting situations that necessitate a transfer of ownership, such as entrepreneurial exits or corporate spin-offs.

For Adenia, the ideal target company is one at a pivotal stage where our controlling interest can facilitate substantial transformation. This involves a thorough analysis of the company’s market position, barriers to entry, differentiation, and potential for defensive growth. We also incorporate expertise from industrial specialists to deepen our understanding of each sector and develop robust value creation plans. These experts often join us in the investment and play crucial roles in governance post-deal. Furthermore, the quality of human resources is paramount in our evaluation process. The success of an investment significantly hinges on the management team's capabilities and execution strength.

Ecofin Agency: As an impact investor, managing investments with a focus on gender inclusivity and climate change presents unique challenges. How does Adenia Capital V plan to align with these impact goals, particularly concerning gender diversity and environmental sustainability?

Christophe Scalbert: Adenia Capital V is committed to enhancing job quality, diversity, and operational sustainability. Specifically, regarding gender diversity, as one of the few African funds to have been designated as a 2x flagship fund, Adenia Capital V has committed to adhering to a framework that mandates at least 75% of our companies to meet specific gender inclusivity criteria before exit. This commitment encompasses investing in women-founded companies, promoting women in leadership positions, and increasing female employment across our portfolio.

To achieve these objectives, we conduct gender gap assessments, implement gender policies, and establish actionable plans to address identified disparities. Our approach is hands-on, working closely with management teams to ensure these policies translate into meaningful change. This commitment to gender diversity and environmental sustainability underscores our dedication to not only generating financial returns but also creating a positive societal impact.

Could you outline the process for a company to secure investment from Adenia Partners, especially in the current climate where access to hard currency is increasingly challenging in Africa? What steps should interest companies take to benefit from your partnership and investment?

Christophe Scalbert: Adenia Partners does not adhere to a rigid process for investment. Our approach is tailored to meet the unique needs of entrepreneurs seeking partners to accelerate their growth and expand their market reach. As we've evolved, our investment capacity has significantly increased, from our first fund of 10 million euros to our current fifth fund targeting 460 million dollars. Our typical investment range is between 20 to 50 million USD, although we're open to larger deals through co-investments.

Our primary interest lies in companies undergoing a transition or requiring capital restructuring within their shareholder base, where we can serve as a reliable partner. We aim to be actively involved, providing not just financial support but also strategic and operational assistance to the management teams. Our focus is on responsible, close partnership with entrepreneurs, recognizing that we may not be the perfect fit for every need. However, for established companies facing transition challenges and seeking partners for ambitious projects, we are an ideal match.

To illustrate, one of our recent investments in Fund 4 was with Herholdt’s, a South African distributor of solar panels. This family-owned business saw the second generation taking over with our support, significantly shifting its product range towards renewable energy and contributing impressively to CO2 reduction in a region where such impact is crucial. This example underscores our commitment to not only financial returns but also making a meaningful environmental impact, demonstrating the type of partnership and transformation we aim to achieve with our investments.

Ecofin Agency: With over a decade of experience in the African investment landscape, which is often characterized by its diverse and complex nature, what critical insights can you offer to fellow investors looking to navigate this region effectively?

Christophe Scalbert: Navigating the African investment landscape requires a nuanced understanding of both its perceived risks and the substantial opportunities it presents. The perception of risk, while sometimes overstated, should not overshadow the immense potential for growth and impact that Africa offers. A fundamental insight for investors, particularly General Partners (GPs) exploring this terrain, is the importance of establishing a local presence. Being on the ground is not just beneficial; it's essential for gaining the kind of insights and influence that can transform potential risks into viable opportunities.

Effective investment in Africa goes beyond mere financial transactions; it involves a hands-on approach and a commitment to due diligence that digs deeper into the socio-economic fabric of the region. This means being prepared to invest time and resources into understanding the local markets, cultures, and business practices. Moreover, the ability to adapt and respond to macroeconomic variables is crucial. An investor's influence in the market can significantly mitigate risks and leverage opportunities, but this requires an active, engaged stance rather than a passive or distant approach.

In essence, the keys to success in African investments lie in thorough due diligence, a hands-on investment strategy, and the capacity to influence outcomes. These elements, combined with a deep commitment to understanding the local context, can empower investors to navigate the complexities of the African market, seize emerging opportunities, and achieve sustainable success.