SWOT ANALYSIS: Verod Capital Management.

OVERVIEW

Verod Capital Management is one of the leading indigenous private equity companies in West Africa. The company was established in 2008 as an investment boutique operating out of West Africa.

Danladi Verheijen and Eric Idiah are the company’s co-founders, and they double as the managing partner and partner respectively.

Verod’s focus is to invest in fast-growing companies in West Africa, particularly Ghana and Nigeria. It invests in a range of sectors including Manufacturing, Consumer goods, Agriculture, Business Services, Financial Services, etc., with investments ranging from $10 million to $25 million. Its current partner companies include Africa Lifestyle Limited, Daystar, Greenspring Educational Services, Niyya Food and Drink, Tangerine, etc.

With over 13 years of existence, Verod Capital has achieved some successes and milestones, a quick look at its Strengths, Weaknesses, Opportunities, and Threats are considered below:

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STRENGTHS

  1. The Management Team. Verod Capital has a wide and diverse group of people in its management team. The principals and team have a strong background in executive management, direct investment, corporate finance, management consulting, and entrepreneurship. The team also has a wide range of experience across Verod’s sectors of interest. The dynamism and depth of the management team ensure that informed decisions are made on its investment portfolios and the appropriate directions for partner companies. This ensures that the companies sustainably increase shareholders’ value over time.
  2. Understanding of The Local Market. Stemming from the depth and the dynamism of the management, the company leverages its industry and market knowledge, business expertise, operational skills to ensure a sustainable and significant increase in the value of its partner companies. It ensures that its portfolio companies grow into strong markets in their sectors. A good example is Tangerine Africa that made a name for itself in the financial sector through
    several mergers and acquisitions. The goal of Tangerine Africa is to become the preferred one-stop financial solutions provider by leveraging on technology while deepening financial inclusion, facilitating wealth creation and protection.
  3. The Investment Process and Strategy. The company has a well-structured investment process. This process includes deal sourcing, deal screening, rigorous due diligence, structuring, and finance. Further to the identification of potential companies for investment, the financial, commercial, legal, and environmental social governance due diligence is carried out before results are presented to the investment committee, which makes recommendations on investment recommendations. The rigorous investment process ensures that the right decisions are made in respect of potential companies. In addition, while leveraging on its transactional advisory unit, the company negotiates and structures deals in a way that provides the necessary framework for growth and increase in value. The deal team for a respective portfolio company stays actively involved in the company to ensure an increase in the value of portfolio investment from investment to exit.
  1. Thriving in a challenging economic environment. Despite the very challenging economies of West African nations, especially Nigeria, the company has successfully helped to reposition some companies and make them leaders in their sector. This defines the resilience and determination of Verod to achieve success in West Africa despite the challenges – economic, political, social, cultural, etc – present in the region.
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WEAKNESSES

  1. Partnership: They focus more on business with proven businesses and considering the environment in which they function (West Africa) is full of SMEs and is duly known for Innovation or idea hub. This limits the scope with which they can penetrate the available market to invest. Considering the finding issue that the West Africa market still faces, this is limiting their impact in business they can support considering their array of skillful people in their rank.
  2. Limited Active Sector Participation: They focus only on a specific sector. This neglects other untapped sectors/resources that need funding to be a viable business for individuals to venture into.
  3. Limited Community Social Responsibility: This is mostly affecting awareness of the company and what they do as a brand.
  4. Awareness: Few companies know about them due to their target audience.
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OPPORTUNITIES

  1. Population: Considering the demography of the population in Nigeria currently, we have a lot of Millennials and Gen-Z in the workspace. This has enhanced creativity and led to the birth of SMEs especially in the Service and Tech space. The population has also created a market that can explore the potential available as soon as a problem can be solved.
  1. Pandemic: This has shaped how people perceive life in general. It has redefined living and the ability to generate wealth. This creates an opportunity for Verod as a massive company emerges that can withstand another lockdown. With the structure that Verod has and their participation in their investee’s business, this will create a pool of return for their provider of capital.
  2. Technology/ Tech Space: This has created a new world yet to be fully utilized. Opportunities erupting every day in the Tech Space to raise investment (various series) having rich quality deals available. A lot of companies operate remotely with a good business model and the involvement of Verod with their structure and expertise will birth a global company that can withstand time and season for the future.
  3. The level of development in West Africa is still low compared to the leading economies in the world. Many countries in the region are still classified as underdeveloped economies, while a lot of the sectors have barely reached half their potential. This presents a great opportunity for investment for Verod Capital. For example, in the financial services space, many people are still unbanked and are
    averse to the great opportunities and possibilities that technology offers. This can be considered as one of the factors accounting for the upsurge in the number of fintech start-ups in the financial space. With the determination of these start-ups to succeed by leveraging on technology, this presents a suitable and potential investment opportunity for Verod Capital.

THREATS

  1. Political and Economic Climate. West Africa, and especially Nigeria has been plagued with a lot of political and economic instability. There’s always uncertainty as to what to expect when there is a change in government. On the economic front, there’s been a lot of incoherent policies that can be considered inimical to economic growth and development. The factors can be a strong hindrance to the growth of economies. Another thing is the ‘flying’ inflation that has Nigeria has experienced recently. For a business to grow, the political and economic policies must be such that make the economic climate ideal for business growth and increase in equity value. Growth in equity value ensures that Verod gets a good return for its investment in the portfolio companies, otherwise, their investment may have gone down the drain.
  2. Competition. Despite the many problems of West African nations and bleak future predictions, some people can still see a light at end of the tunnel. The potential for massive growth and development exists in West Africa and this is the reason, investments and private equity firms keep trooping in to help bridge the gap between great business ideas and funds. This implies increased bidding for potential growth companies. Verod must continually stay ahead of the game to be able to beat the competition in the market.
  3. Technology. A very dynamic tool for creating value in the 21st century is technology. It has successfully impacted the way we do many things and improved our lifestyle. However, technology also comes with its risks. These risks include cyber-attacks, data loss, fraud, etc. If any of Verod’s portfolio companies suffer from this risk, it may negatively impact its value and by extension Verod Capital Management. The constant change in technology also implies that companies must also adopt tools that to manage the risks that come with it.
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CONCLUSION

In conclusion, Africa remains a sleeping beauty with so many potentials to be tapped. With more industries springing up and even more innovative businesses, Verod Capital if well-positioned can invest in businesses that will tomorrow turn into African giants.



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