Go­ing private with Absa Cap­i­tal

BEE - the lever­age in buy-outs in South Africa to­day

Finweek English Edition - - Main stories this week -

outh Africa is a great place to be do­ing busi­ness at the mo­ment. Busi­ness con­fi­dence is at a high, while eco­nomic prospects are pos­i­tive. It there­fore comes as no sur­prise that the Private Eq­uity in­dus­try is also ro­bust and con­fi­dence in its con­tin­ual growth amongst prac­ti­tion­ers is high. One of the driv­ers of con­tin­ued growth in Private Eq­uity is Black Eco­nomic Em­pow­er­ment (BEE). The re­cent man­age­ment buy- out of MB Tech­nolo­gies (MB Tech) by black in­vest­ment com­pany Royal Bafo­keng Hold­ings (RBH) can be re­garded as one of the re­cent Private Eq­uity suc­cess sto­ries in our coun­try. MB Tech is a mar­ket leader in dis­tri­bu­tion of branded hard­ware, soft­ware, ser­vices and so­lu­tions in the South African in­for­ma­tion tech­nol­ogy sec­tor. RBH bought into the busi­ness in 2006 by tak­ing a 26% stake to give MB Tech an em­pow­er­ment profile. It has now ex­er­cised its op­tion to buy-out mi­nor­ity stake­hold­ers and be­come the pri­mary share­holder, turn­ing it into South Africa's largest black-em­pow­ered and pri­vately owned in­for­ma­tion tech­nol­ogy group. Absa Cap­i­tal’s Eq­uity In­vest­ment team suc­cess­fully fa­cil­i­tated the trans­ac­tion – from lead­ing the R513 mil­lion man­age­ment buy- out and delist­ing trans­ac­tion of MBT dur­ing Oc­to­ber 2002 to fa­cil­i­tat­ing the in­tro­duc­tion of RBH as a share­holder in MB Tech in 2006 and now as­sist­ing RBH to buy out the bal­ance of its share­hold­ing in MB Tech. “Absa Cap­i­tal added sig­nif­i­cant value to MB Tech in the pe­riod since our delist­ing. Un­der­per­form­ing di­vi­sions were sold or re­struc­tured, rev­enue and profit were grown sub­stan­tially and fund­ing sup­port was pro­vided for growth ac­tiv­i­ties. We are to­day a stronger busi­ness, with sig­nif­i­cant growth op­por­tu­ni­ties,” says Leo Bax­ter, the man­ag­ing di­rec­tor of MB Tech­nolo­gies.

Tak­ing BEE to the next level “ The con­clu­sion of the In­for­ma­tion and Com­mu­ni­ca­tions Tech­nol­ogy (ICT) Char­ter in 2005 cre­ated op­por­tu­ni­ties for BEE com­pa­nies and banks alike to sup­ply fund­ing and play an ad­vi­sory role in this sec­tor. Absa Cap­i­tal has a strate­gic fo­cus on the ICT sec­tor and the Royal Bafo­keng/MB Tech trans­ac­tion is in line with our vi­sion to take BEE to the next level,” says An­dré Pi­eterse, head of Eq­uity In­vest­ments at Absa Cap­i­tal. And that’s what Absa Cap­i­tal’s Eq­uity In­vest­ments team is all about – tak­ing BEE to the next level.

“Absa Cap­i­tal is well pre­pared to add im­pe­tus to the em­pow­er­ment drive. We un­der­stand the chal­lenges of fi­nanc­ing em­power -ment trans­ac­tions and our in­no­va­tive so­lu­tions are home-grown, ver­sa­tile and de­signed with a view to pro­mote sus­tain­able broad­based BEE that will fun­da­men­tally trans­form the own­er­ship pat­terns of the South African econ­omy as es­poused in the Fi­nan­cial Ser­vices Char­ter (FSC), of which we are sig­na­to­ries,” Pi­eterse adds. The chal­lenge in struc­tur­ing BEE deals con­tin­ues to be a lack of fund­ing and ac­cess to fund­ing on the part of BEE in­vestors. “Absa Cap­i­tal’s Private Eq­uity team has a sig­nif­i­cant role to play in partly ad­dress­ing this chal­lenge. Private Eq­uity seeks to par­tially meet the gap of re­quired cap­i­tal to com­plete BEE trans­ac­tions. For a sense of how much cap­i­tal is re­quired, the JSE is cur­rently cap­i­talised at ap­prox­i­mately R4 tril­lion. To be able to place 25% of that into black hands, a whop­ping R1 tril­lion is re­quired,” says Pi­eterse. “Eq­uity still re­mains costly as op­posed to debt, how­ever, most of the op­por­tu­ni­ties aris­ing in Private Eq­uity have a BEE flavour. This trend will con­tinue for the next cou­ple of years un­til com­pa­nies have met their re­quire­ments,” he adds.

Fully lo­cal, fully global Absa Cap­i­tal came into be­ing af­ter Bar­clays Bank plc bought a ma­jor­ity share in Absa in July 2005. The phi­los­o­phy driv­ing the ac­qui­si­tion has been to com­bine the best of Bar­clays and the best of Absa to cre­ate the pre-em­i­nent bank on the African con­ti­nent. The spin-offs for BEE stake­hold­ers are hugely ex­cit­ing. There is no other in­vest­ment bank, or sim­i­lar in­sti­tu­tion lo­cally, that can cred­i­bly lay claim to what Absa Cap­i­tal can of­fer in terms of the in­no­va­tive struc­tur­ing, ar­rang­ing, un­der­writ­ing, im­ple­men­ta­tion and fund­ing of BEE trans­ac­tions. In ad­di­tion to struc­tur­ing and fi­nanc­ing lo­cal em­pow­er­ment deals, Absa Cap­i­tal’s Eq­uity In­vest­ment team, through its af­fil­i­a­tion with Bar­clays Cap­i­tal, can now also ac­com­pany BEE com­pa­nies on their ven­tures to leap fur­ther off­shore. As an emerg­ing mar­ket that’s in­creas­ingly play­ing on the world stage, the South African mar­ket has for a while de­manded ac­cess to this level of in­vest­ment bank. Absa met this need head-on and now, through Absa Cap­i­tal, has be­come a global player in in­vest­ment bank­ing cir­cles.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.