CDC Group plc, the UK’s development finance institution, has today demonstrated its commitment to finding new ways to channel growth capital into African markets by investing US$20mn in Solon Capital Holdings, an investment holding company based in Sierra Leone.
The standard ten-year private equity model does not meet the needs in some African markets, where longer-term capital is required to build strong businesses. Solon’s structure and investment strategy takes a creative approach to solving market problems in the countries where they operate. By using a permanent capital vehicle, Solon can offer greater flexibility to the businesses it invests in, while providing investors interim liquidity through dividends and exits at the holding company level.
Founded in 2010, Solon currently has four investments with operations in Sierra Leone, Liberia, Guinea and Cote D’Ivoire. Solon’s investment strategy is to build and invest in companies that fill gaps in the economy using defensive business models that counteract the challenges of those markets. These businesses include what is now one of the largest vehicle rental, leasing and fleet management companies in the region, Flash Vehicles, as well as Rising Academies, a fast growing, high-quality school operator focused on increasing access to education. CDC’s funding will enable Solon to grow its existing investments and provide long-term equity to businesses in the region.
This is the first time CDC has invested in a permanent capital vehicle, as part of its commitment to find new ways to meet the different needs of African markets in order to create jobs and deliver long-term growth. The approach complements CDC’s well-established funds strategy. As their first institutional investor, CDC will support Solon’s management team as they continue to fund raise.
CDC’s Managing Director of Intermediate Equity, Murray Grant said:
“Businesses in Sierra Leone face great challenges in raising the capital they need to grow. Solon’s management team has shown that it is possible to successfully grow businesses over the long-term using a different model from traditional private equity. We’re excited to support Solon as they bring their creativity to new businesses and make their existing companies regional champions; delivering growth, jobs and impact in the region.”
Solon Capital Holdings’ David Dobrowolski said:
“We are thrilled to partner with CDC. Our markets present both challenges and opportunities that are unique to the region, so we’ve uniquely structured our business and investment strategy to respond. CDC has grasped these ground truths, and has been dedicated in working collaboratively with us to craft a structure that meets the needs of all stakeholders.
We look forward to maintaining this collaborative spirit as we further expand the breadth of our activities in the region, provide risk-adjusted returns to our investors and make a sustainable impact on the development of the communities in which we operate.”
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