Over 20 years, Adenia Partners has raised over $800million from limited partners (LPs) across five funds, all of which have all beaten targets. The private equiteer has gone on to deliver over 32 deals and execute 17 exits with an average return of 2.3X. How does this success tie in with a differentiated strategy to pursue majority-stake deals – in a market where most players prefer taking minority ownerships? Adenia’s managing partners, Stéphane Bacquaert and Alexis Caude [pictured], discuss.
What values drive your consistency, growth, and success?
Since our founding in 2002, Adenia has built a reputation as one of the most prominent pan-African impact investment firms. We are anchored by several pillars, at the centre of which is our majority-stake ownership model. The value that Adenia places on majority ownership sets us apart from many other African investors. Put simply, we take controlling stakes in market-leading companies. Our team is supremely diligent in the selection process, and we are always attentive to staying true to our underlying strategy.
By taking majority stakes, we are empowered to drive sustainable value creation, buttressed by our strong on-the-ground presence. We see ourselves as agents for change and are passionate about transforming the businesses we invest in. Ultimately, our bedrock culture of ownership and responsibility has delivered a track record of financial success and meaningful, real-world impact.
Our other pillars are an entrepreneurial ethos that we share with all our investee companies, a collaborative approach, and hands-on support. The way our environmental, social, and governance (ESG) and impact agenda drive lasting value creation is also at our core. Taken together, these guiding principles shape all our investments, and have laid the foundation for our ongoing growth and success.
Your funds have all surpassed targets. Why do LPs keep backing you?
The Adenia team is immensely grateful for the ongoing support of our LPs. Most of our many repeat investors cite our strong financial and impact returns, consistency in achieving the targeted strategy, and exclusive focus on Africa – as reasons for returning.
The majority of Adenia’s investment capital comes from existing LPs, who have invested in one of our previous funds. On average, these LPs more than double their subsequent commitments compared to their investment in the previous fund. For instance, the European Investment Bank (EIB) and Promotion and Participation Company for Economic Cooperation (Proparco) have been investing with us for more than two decades. Today, they are our largest investors in our fifth fund, with each committing $40 million. We place huge value on the LP relationships that we have cultivated over the long term.
That said, we are also focused on mobilising private and African capital into our funds. We have traditionally seen a 50/50 split between private capital and development finance institutions (DFIs) in our capital tables. Adenia has also become a valuable platform for LPs to deploy additional capital through co-investments, which can allow the investor to enhance both financial returns and impact by becoming direct shareholders in sustainable businesses.
Why does your strategy to take majority stakes bolster success?
Majority ownership stakes allow Adenia to control the ESG, value creation, and value realisation agenda for the businesses we invest in. For most private equity investors, minority-stake and growth capital investments are the norm. However, we feel that such an approach introduces substantial ‘partner risk.’ Should the relationships or decision-making alignment with other partners break down, there is a very real possibility that the investment itself will not be successful. Control investments eliminate that risk. Adenia does not compromise on this essential aspect of our investment strategy.
During the life cycle of an investment, having control offers us with three important levers to make changes that enhance value creation. First, it means that we define the business strategy and can decide important decisions to change it. During our investment in Herholdt’s, for example, we have fundamentally shifted the product focus. Our change pushed sales of renewable energy products from 40% to 95%, and the company’s growth has been stunning. Secondly, being in control means that we are responsible for talent appointments, which is a lever for executing change. Finally, being in control means that we can set intentional impact targets, empowering us to drive positive change for our communities and our planet.
How have you successfully delivered 17 exits out of 32 deals?
As Adenia strives to realize the value we have generated towards the end of an investment life cycle, being in control offers important benefits. Most obviously, it means that we can determine the timing and process of the exit. For instance, we are not pulled off course by serving the needs of partners whose timing may not align with maximizing the investment’s value. Secondly, our control stake allows us to target strategic and industrial buyers, who typically prefer to acquire full control. Finally, when we face inevitable headwinds, Adenia’s controlling stake allows us to react more quickly by changing strategy or management in ways that ultimately support exit value.
Across our 17 exits so far, Adenia has generated an average 2.3X return with an average holding period of less than six years. In our two decades of existence, we have never experienced a full write-off, and we have lost money on only two transactions. We believe that our majority-stake investment strategy is the primary driver of success at exit, in addition to fostering value creation during the investment.
What is Adenia’s strategy for sustaining this success in the long-term?
Adenia has integrated seven partners, in addition to the founder. Very early in Adenia’s history, the founder, Antoine Delaporte, recognized the importance of opening up the capital of the firm to talented, young investment professionals, with the ultimate goal of aligning interests and incentivizing long-term commitments. Over the years, our partner group has evolved with the idea of ensuring that the firm’s owners are the key decision-makers when it comes to selection, management, value creation, and the realization of investments. Thanks to Antoine’s early vision, Adenia has developed a deep bench of experienced partner-owners, mitigating any ‘key person’ risk and succession issues.
