11 Distressed Retailers: Why Private Equity Funds Should Come to the Rescue in South Africa for opportunities to provide capital and management expertise so that local businesses in Kenya could scale up. Africa Across Africa, there is growing interest in Africa’s retail sector, driven by an expanding middle class and a rise in consumer spending. In addition, the African Continental Free Trade Area is expected to begin providing real benefits to retail companies in Africa in the next decade, as trade across the continent becomes easier. Many African countries are scaling up production facilities, investing in transport and utilities infrastructure and streamlining customs processes to be able to take advantage of continental free trade. Retail companies trading across the continent will be major beneficiaries of streamlined intra-African trade. PE capabilities The retail sector’s need for fresh capital, restructuring and strategic realignment is a good fit with the capabilities on offer from certain PE funds. Some potential areas of focus for PE firms when assisting distressed African retail companies include leveraging their expertise in operational efficiency to streamline distressed retailers, reducing costs and improving profitability in the process. PE firms can also assist distressed companies to consolidate market share and drive growth through strategic acquisitions and mergers. Digital transformation strategies, which include investments in digital infrastructure and e-commerce capabilities, can help struggling retailers adapt to changing consumer behaviour and capture market opportunities. PE firms can assist in the implementation of innovative payment solutions, enhanced digital security and blockchain for supply chain transparency, for example. With the rise of artificial intelligence, augmented and virtual realities, and personalisation through data analytics, PE companies that are at the forefront of these technological advancements are able to assist retail companies to adapt to evolving market conditions. Sustainable alternatives The growing demand for sustainable products could also be a way for PE companies that focus on ESG principles to add value to distressed companies by creating strategies that prioritise environmentally friendly alternatives. Other ways PE companies could assist distressed retailers include advising on product ranges, enhancing the logistics and supply chains of the businesses, opening up new market segments and assisting to upgrade infrastructure. While exercising caution, PE firms are able to leverage distressed retail companies to grow their portfolio in the sector. This will enable PE firms to capitalise on improving consumer buying trends and economic conditions going forward. Despite current macroeconomic challenges, investors willing to take on the risk of purchasing distressed assets through business rescue could see significant returns and breathe new life into the distressed retail sector in the process.
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