Private Equity, for those who may be familiar, may evoke different emotions. Some of awe, of the jet setting, business casual dressing , abbreviation speaking men and women, who talk of millions of dollars and irr ; while others view them as money hungry sharks, where money costs you a pound of flesh in your business. Whatever the case, capitalraising demands may bring you and these privateequity teams together to grow your business through selling part of your business to them. In East Africa and indeed Kenya, the private equity landscape has been active, and has great potential for growth as shall be discussed at the upcoming superreturn Africa 2023 in Capetown. Private equity is the capital that invests in companies whether private or listed (quoted private equity) with the aim of creating value in their investment over time.

So what does private equity have to do with governance ? As earlier stated, private equity invests and purchases a stake in a company and through financial support and active oversight, increases the value of their investment over time in order to make a returnoninvestment . In terms of active oversight, private equity brings together ownership (shareholders) and control (the board and management) by taking up governance roles and as well and through management, looking to improve operational efficiencies. For operational efficiencies, it may include reworking the management team, rationalizing costs, expanding into new markets and enhancing technology and use of data.

Private equity is operated through fundmanagers who have an incentive to increase value for their capital and investors, in order to make money through performance fees. Having that incentive in mind, they may negotiate to take Board seats, bring on independent directors who understand the business industry and as well take up active managerial positions in order to create value for a limited investment period before they exit. The principles of governance they may act on include;
1. Ensuring there is a performing boardofdirectors who are aligned to the success of the business and answerable to shareholders
2. Developing and executing a strategic direction and possible expansion of the business thereby increasing returns
3. Incentivising management with kpis that are linked to pay and rewards
4. Ensuring that there are operational frameworks, thereby institutionalizing the business, championing compliance to manage risks
5. Using esgintegration ensuring the company acts sustainably and for the longterm
6. Preparing the company for further investment through am exit- a trade sale, strategic investor, flip to another pe investor or an ipo listing.

Being past pe team members, we at Akira Consult are advocates for ethical investing by Private Equity teams and are happy to come alongside in the deal in the pre-investment discussions, duediligence , onboarding, training and compliance. Call us today!
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