Hedderwick back in the entrepreneurship business as he joins Joffe at Long4Life
It is the week of the Second Career Coming: Grant Pattison, former Massmart CEO, taking on the toughest job in South African retail at Edcon and Famous Brands lifer Kevin Hedderwick teaming up with Brian Joffe at Long4Life as chief operating officer. Not keen to spend the rest of his days waiting for the occasional board pack, Hedderwick is back in the business of entrepreneurs.
Have you joined as the rainmaker?
Brian is the rainmaker, but together we are quite well connected so we will both be looking for opportunities. There is lots of flexibility in the model: we are not saying we are looking for businesses that are doing more than R100m in ebitda, etc – it doesn’t matter. They can be small or medium-sized, as long as they are great brands with great people and are scaleable and with some equity.
Long4Life will invent itself as it goes along. While I don’t think it will necessarily always be locked into the lifestyle space, we are not going to go looking at businesses that are involved in tech or banking. Sorbet’s a nice example. The idea is to get involved, to help it grow.
Talk among some commercial lawyers is that, judging by deal flow, SA is already in recession – would you agree? And does that make it a good time to launch?
Brian says he launched Bidvest when it couldn’t have been any worse and the rest is history.
The merger-and-acquisition space is pretty tough right now, because people are hanging on to the good assets and you will find a lot of assets that are in need of repair and those are not assets you really want to get involved in because the amount of time and energy is just not worth it.
Is it hard to convince owners of good businesses to sell?
It can be, especially family owned businesses. They are petrified of anything that is in the listed space. They have a fear that “now you’re going to corporatise me” and that is exactly what we don’t want to do. We just want to invest in them and let them do what they are good at, but allow us to put some value in terms of networking and processes.
One of the [factors] that would have made it easier for us is if capital were hard to come by, but it’s not so hard.…
Really?
If you have a good business and you go to a financial institution, they will throw money at you.
So you are competing with the banks?
I think we will be because we want to invest capital in businesses, but they could say, “I don’t need capital, I can go to the bank and get it myself.”
So how do you convince them?
You have to convince them you can give value beyond capital: [putting in] processes, expertise, helping open doors, networking with other businesses.
What if you get it wrong?
Even though Famous Brands is sometimes held up as a model, we got some things wrong.
Don’t get seduced by the size of the category. The chicken business is a good example. There were two big players, KFC and Nando’s, so we thought there must be place for a third one and bought Church’s from America. We thought it would work — but the consumer hated it. The trick is to admit you got it wrong quickly and fix it.
Is it likely you’ll need to raise more than your R2bn in seed capital?
The more you raise upfront the more pressure you are under to perform so the R2bn is nice, thank you very much. But there is nothing stopping us from going back to the market to raise more.
Will it be an easy sell?
[It] depends on performance. If we are able to assemble a galaxy of quality assets, the market will fall in love with the listed product.
WE THOUGHT IT WOULD WORK — BUT THE CONSUMER HATED IT. THE TRICK IS TO ADMIT YOU GOT IT WRONG AND FIX IT
Could you end up competing with FBR?
I would say it is highly unlikely — what is out there that Famous Brands does not already participate in?
I’m not about to get involved in assets that would compete with Famous Brands — it is not the right thing to do. Famous Brands is like my baby.
Are you upset to see they are expecting their first decline in earnings?
No, I’m not because I can take part of the blame for it! The big part is the fact that we did the Gourmet Burger Kitchen transaction and the exchange rate went against us.
It is a temporary blip. Unfortunately when you read it from the outside a lot of people are asking, what is going on? But I know it really is circumstantial, not operational. That business is rock solid and I still think it is a great investment opportunity.