Horizon Equity Partners, a leading South African private equity firm, today announced the first closing of its new private equity fund, which offers development capital to smaller or emerging southern African companies. Horizon Fund III follows two highly successful earlier funds (Horizon Techventures and MCA Investments) and intends raising up to R500 million. At the first closing Horizon Fund III had attracted R250 million in commitments from institutional investors, including several investors from its earlier funds. Commitments from other investors are pending and a final closing is expected by year-end.

Horizon Fund III will provide much needed-expansion capital for small and medium businesses with the necessary potential to take advantage of South Africa's booming economy. The fund will focus primarily on the traditional Horizon success areas of information technology, communications, financial services, and healthcare, but will consider investment in other industry sectors as well. In addition to expansion capital, it will also finance secondary transactions such as management buy-outs and BEE buy-ins.

Horizon Equity's managing director, Richard Flett comments: "Although private equity capital for leveraged buyouts of major or listed corporations is plentiful, the same cannot be said for small or even medium sized businesses. Precious little development capital is available to healthy businesses that need to expand, while venture capital for start-ups is virtually non-existent. Yet in the case of economies that are roaring ahead, such as China and India, almost all the private equity capital raised is for development and ventures rather than buyouts.”

Flett believes that South Africa's lop-sided distribution of equity funding is bad for the economy. "I do not see how South Africa will meet its economic growth objectives over the longer term if we do not create, nurture and grow more small and medium sized enterprises. These companies are the backbone of any economy and the feedstock for tomorrow's large corporations. The private equity industry should be doing more to finance emerging enterprises with above average growth potential."  

Previous companies financed by Horizon Equity include Prism (now part of NASDAQ listed Net-1), ATM Solutions (winner of Business Day's Unlisted Company of the Year award in 2003), Denny Mushrooms (now part of JSE listed AVI), and bedding retailer Renaissance Retail (now part of JSE listed Ellerines).

Fund III's cornerstone investor is SIFEM AG, an international development agency of the Swiss government. Its managing director, Claude Barras, says, “Based on our experience in emerging markets worldwide, we believe South Africa represents an interesting opportunity for private equity at this time and that Horizon's Fund III will help to fill an important gap in the current capital markets. Through our investment in Horizon Equity's previous fund, we have been impressed by the skill and experience of the management team, who have demonstrated a rare ability to make profitable investments in emerging companies that also meet our developmental objectives for South Africa, in particular the creation of new jobs."

Other key international investors that have made commitments to Fund III include CDC Group, a UK government emerging markets fund of funds investor, and Finnfund, a Finnish government fund for industrial cooperation. Several other investors are at an advanced stage of evaluating the fund and a final closing is expected before year end 

Horizon Equity Partners, a leading South African private equity firm, today announced the first closing of its new private equity fund, which offers development capital to smaller or emerging southern African companies. Horizon Fund III follows two highly successful earlier funds (Horizon Techventures and MCA Investments) and intends raising up to R500 million. At the first closing Horizon Fund III had attracted R250 million in commitments from institutional investors, including several investors from its earlier funds. Commitments from other investors are pending and a final closing is expected by year-end.

Horizon Fund III will provide much needed-expansion capital for small and medium businesses with the necessary potential to take advantage of South Africa's booming economy. The fund will focus primarily on the traditional Horizon success areas of information technology, communications, financial services, and healthcare, but will consider investment in other industry sectors as well. In addition to expansion capital, it will also finance secondary transactions such as management buy-outs and BEE buy-ins.

Horizon Equity's managing director, Richard Flett comments: "Although private equity capital for leveraged buyouts of major or listed corporations is plentiful, the same cannot be said for small or even medium sized businesses. Precious little development capital is available to healthy businesses that need to expand, while venture capital for start-ups is virtually non-existent. Yet in the case of economies that are roaring ahead, such as China and India, almost all the private equity capital raised is for development and ventures rather than buyouts.”

Flett believes that South Africa's lop-sided distribution of equity funding is bad for the economy. "I do not see how South Africa will meet its economic growth objectives over the longer term if we do not create, nurture and grow more small and medium sized enterprises. These companies are the backbone of any economy and the feedstock for tomorrow's large corporations. The private equity industry should be doing more to finance emerging enterprises with above average growth potential."  

Previous companies financed by Horizon Equity include Prism (now part of NASDAQ listed Net-1), ATM Solutions (winner of Business Day's Unlisted Company of the Year award in 2003), Denny Mushrooms (now part of JSE listed AVI), and bedding retailer Renaissance Retail (now part of JSE listed Ellerines).

Fund III's cornerstone investor is SIFEM AG, an international development agency of the Swiss government. Its managing director, Claude Barras, says, “Based on our experience in emerging markets worldwide, we believe South Africa represents an interesting opportunity for private equity at this time and that Horizon's Fund III will help to fill an important gap in the current capital markets. Through our investment in Horizon Equity's previous fund, we have been impressed by the skill and experience of the management team, who have demonstrated a rare ability to make profitable investments in emerging companies that also meet our developmental objectives for South Africa, in particular the creation of new jobs."

Other key international investors that have made commitments to Fund III include CDC Group, a UK government emerging markets fund of funds investor, and Finnfund, a Finnish government fund for industrial cooperation. Several other investors are at an advanced stage of evaluating the fund and a final closing is expected before year end