Kenya’s pioneer venture capital fund Acacia set for winding up by Deloitte

Deloitte’s Harveen Gadhoke. PHOTO | SALATON NJAU 

By VICTOR JUMA

One of Kenya’s first venture capital outfits Acacia Fund is set to be liquidated after falling into dormancy.

Formed in 1996, the Sh1.9 billion fund invested in Kenya’s private firms including fashion retailer Deacons and Hoggers — the owner of fast food franchises Steers and Debonairs.

It is, however, now undergoing voluntary liquidation after its backers formed new investment vehicles including private equity funds to invest in the increasingly competitive local and regional market.

“That the company be wound up voluntarily,” reads a special resolution by the fund’s members at an extraordinary general meeting held on January 17.

Deloitte East Africa’s receivership and liquidation expert Harveen Gadhoke was appointed as the liquidator at the meeting.

Creditors were required to have listed their claims against Acacia by Tuesday last week, according to the latest Kenya Gazette which published the winding-up notice.

Mr Gadhoke told the Business Daily that Acacia does not have investments currently.

“The company has been dormant and has no investments,” he said, adding that the changed investment landscape contributed to its discontinuation.

Mr Gadhoke said Acacia as a venture capital fund is less suited to the current investment scene that is dominated by PE funds and development finance institutions (DFIs).

PE firms prefer to buy mature companies that are already established which they help grow or turn around.

Venture capital firms, on the other hand, go for start-ups with high growth potential. This exposes them to higher risks which can only be mitigated by having a large pool of investments.

An influx of capital has also tipped the scales in favour of PE funds which can invest Sh1 billion or more in one established company with an aim of exiting in five to seven years at a significant profit.

More than 10 PE funds targeting Kenya and the East African region have been formed in the past seven years, a period in which DFIs have also stepped up their activities.

Acacia was a pioneer venture fund, providing capital and technical expertise to firms that could not access or did not prefer bank loans to fund their growth.

The fund’s original shareholders included African Development Bank and sovereign wealth funds CDC Group (UK) and Swedfund (Sweden).

Swedfund bought out its partners in the fund for $10 million (Sh1 billion) in 2008 to take control of the company which by then was being managed by Aureos Capital.

Swedfund, which opened an office in Nairobi after taking over Acacia, started investing in Kenyan companies directly and through other funds in what led to the dormancy of Acacia.

The fund, for instance, bought stakes in Timsales, Nairobi Women’s Hospital and Radisson Blu. It has also backed private equity firms Africinvest and Emerging Capital Partners that have invested in several Kenyan firms.