Benchmark International is pleased to announce the transaction between EFRC Holdings (Pty) Ltd (including its wholly owned subsidiaries Elgin Free Range Chickens (Pty) Ltd, Elgin Poultry Abattoir (Pty) Ltd and EFRC Agri Operations (Pty) Ltd) and The Africa Food Security LP (AFS LP) managed by Zebu Investment Partners.READ MORE >>
Benchmark International is pleased to announce the transaction between OpenSource International LTD, OpenSource Intelligent Solutions (Pty) Ltd (OpenSource) and Workforce Holdings Ltd.
OpenSource is a South African and Mauritius-based business that was established in 1993. The company places skilled SAP resources on both a contract and permanent basis as clients utilize SAP’s Enterprise Resource Planning system. The company also provides SAP training and other services, including SAP site maintenance and payroll outsourcing. OpenSource is an accredited SAP partner and resources consultants across all SAP modules and complementary technologies for companies internationally.
Managing Director Michelle Viret has over 35 years of IT experience and specialises in marketing and sales, focusing on resourcing and training. Delighted with the outcome, she commented on the transaction, saying, “Again, thank you for introducing OpenSource to the right company upfront. You heard our brief, and from the first meeting, the long-term choice we made is right for us. Our business fits hand in glove with the Workforce philosophies, operation, and culture – it is certainly a ‘can do’ attitude, and it is refreshing to have input from leaders that have years of business knowledge and savvy, specifically someone like Mr. Ronny Katz.”
Workforce Holdings and its Group of companies provide employment, training, healthcare, wellness, financial services, and lifestyle benefits to individuals and their employers. Established in 1972, Workforce Holdings is listed on the JSE Altx exchange, employing over 1,340 permanent staff and paying approximately 34,000 assignees.
The Group’s business model reflects its diversification and is structured into five operating segments: staffing and recruitment, training and consulting, employee health management, financial and lifestyle products, and process outsourcing. This structure facilitates integration and diversification of services, including expansion into adjacent services and new markets.
Detailing their motives for the acquisition, Workforce stated that this transaction allowed it to further expand its human capital services offering. “This is consistent with Workforce’s previously stated growth and diversification strategy. The acquisition introduces a profitable and specialised business with a broad footprint and a driven, entrepreneurial management team into the Workforce group,” it said.
Ronny Katz, chief executive officer of Workforce, said, “The OpenSource Group offers services as an accredited SAP partner, allowing Workforce to offer leading solutions in a new and diverse market. Also, this complementary offering provides both Workforce and the OpenSource Group with exciting cross-selling opportunities within their respective customer bases.” He added: “Dealing and engaging with Benchmark was a positive experience. The professionalism and pragmatism of their deal team assisted us as buyers in expediting, and ultimately finalize, the transaction.”
Tiaan Smit, representing Benchmark International’s South African office, added, “For the Benchmark International team, understanding Michelle and the unique strengths of the OpenSource business that she has built up over the last 28 years was key to finding the right acquirer. We believe that Workforce is the perfect match, and by leveraging Workforce’s established backing and support, Michelle’s drive, energy, and strategic foresight will take the businesses to even greater heights. We’ll be following their progress closely and look forward to their mutual success.”READ MORE >>
Benchmark International is pleased to announce the transaction between NEWGROUP (PTY) LTD and an Undisclosed Acquirer for the Regal Pet Health Brand.
NEWGROUP (PTY) LTD is a private company owning several brands in the complementary medicines and natural beauty sections including Herbex. NEWGROUP brands trade throughout South Africa and internationally. The Regal Pet Health brand – A division of NEWGROUP– is comprised of a range of herbal remedies that offer the pet owner the tools to address the health of their pets naturally.
Eddie Bisset, Chief Executive Officer for NEWGROUP, commented on the transaction saying, “I would like to thank the full Benchmark team for the smooth facilitation of the Regal Pet Health Brand sale. The level of professionalism displayed by everyone from start to finish is unparalleled. As a first time seller, we were guided every step of the way, with no pressure or unanswered questions. Every concern, question or change of strategy was met with prompt courteous answers.”
The acquirer, is one of the top five companies in the Health and Beauty Industry with a growing footprint in the rest of Africa. The acquirer commented on the transaction: “It really was a pleasure working with Benchmark in facilitating this transaction. They were really on the button and extremely quick to give feedback in making things go as smooth and fast as possible.”
Tiaan Smit, Transaction Director at Benchmark International added, “Throughout the entire process all parties involved were communicative and collaborative, allowing the Benchmark team to execute a swift transaction. It was a pleasure to represent NEWGROUP (PTY) LTD in this transaction and we are delighted to have found a good home for the Regal Pet Health brand. On behalf of everyone at Benchmark International, we would like to wish all parties every success for the future.”
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The most expensive mistake in selling a business is to undersell it. A qualified intermediary can add significant value to a transaction simply by virtue of experience.
Putting this into context, buyers are fit for transactions, they conclude deals in multiple jurisdictions and often have dedicated teams that focus exclusively on mergers and acquisitions. Business owners may typically have done a transaction or even two in their careers, but most often they have not yet sold a business and can benefit enormously by having a seasoned sell-side advisor on their team.
Whilst there are very broad categories of advisor; no two intermediaries are the same. In selecting an advisor there are some fundamental questions to ask that will help establish whether the firm will meet your specific needs and requirements.
1. Who will manage my deal?READ MORE >>
Benchmark International is proud to be a part of the 2020 OCFO Founders Conference, taking place virtually, during Global Entrepreneurship Week on 19th November 2020.
As part of the event, Dustin Graham, Managing Partner of Transactions for Benchmark International's South African offices, will be speaking on the topic Building Your Business For Sale.
Topic: Building for Sale, 14:40–15:00 – Dustin Graham
Event date and time: 19th November 2020, 13:00–16:00
Location: Virtual event
Link to register and ticket sales: https://zcu.io/1od4
Link to event agenda: https://www.foundersevents.co.za/agenda/
OCFO Founders Conference Annual Event
The annual Founders Conference normally takes place in the heart of beautiful Cape Town during Global Entrepreneurship Week. However, in the light of Covid-19, It was decided to host the Founders Conference as a virtual event this year.
The conference brings together top business people, investors, and entrepreneurs in South Africa for powerful networking, learning, and inspiration. The Founders Conference is one of the biggest gatherings of entrepreneurs on the African continent—not to be missed by any serious founder. Speakers include some of the most successful founders around the globe and investors who have raised and invested billions.READ MORE >>
Benchmark International’s industry agnostic approach has proven to be informative during the Covid-19 epidemic. Interest in most of our client base has not declined and we are receiving queries from a wide range of parties.
Who are these interested parties and what is their investment approach? Analysing the data provides an interesting insight and some understanding of the shifting approach amongst these different categories of buyers.
• Listed Companies with their robust balance sheets are compelled to continue investing to meet forecast performance targets and stakeholder objectives. Generally, their acquisition mandates are governed by their investment committees where risk is a dominant factor. Turnaround and distressed assets are typically less attractive unless fulfilling a defined strategic need.
• Foreign Corporates from the Western to Eastern hemisphere still see South Africa as a stable foundation to expand through to Sub-Saharan Africa. South Africa’s well-developed IT and broadband infrastructure, advanced legal and banking sectors, safe aviation record, and access to a cost effective English-based labour pool facilitates business across the African continent. Themes of specific interest have emerged with a higher than normal volume of inbound enquiries for renewable energy, TMT, IT infrastructure and service as well as software businesses in particular.
• Private Equity in South Africa has grown and matured immensely over the last decade and remains one of the top acquirers/investee categories in the middle market for Benchmark international. Attached to the funds they raise are set acquisition criteria, investment limits and defined investment timelines where cash reserves must be spent. Similar to the listed segment, risk profiles are a key investment mandate consideration. During lockdown, Benchmark International has experienced a slight shift in the number of deals concluded towards those that have private equity components to them.
• Family Offices have shown resilience through the epidemic and continue to show interest in our opportunities. Their mandates are more flexible but are primarily based on where their strategic and financial input will maximise returns.
• Covid-19 has forced Large Private Companies to look at vertical integration of their supply chains. They also continue to seek to grow their market share through horizontal acquisitions and acquisitions of niche market opportunities.
• High Net Worth Individuals remain interested in growing their asset bases. They generally focus on opportunities in which they have existing investments and expertise and are able to achieve economies of scale.
The impact of the various lock-downs necessitated by the pandemic has directly affected the financial performance of the vast majority of businesses across the globe, both small and large.
Whilst certain M&A deals have continued on their charted timelines, others have seen an acceleration whilst some re-negotiation, and even stoppages, as a consequence of the impact in both buyer and seller positions. Funded deals feeling the most impact as they have in some instances experienced delays as bankers and financiers attend to more pressing matters in the moment.
The question foremost in most seller’s minds is that of value and how, in cases of a drop in performance, this might impact the value of their transactions.
In the same way that a company producing hand sanitiser cannot expect to achieve a valuation based on a short-term explosion of results, companies impacted negatively will not be unduly penalised if the effects are short term.
Normalisations are a fundamental element of negotiation in any M&A transaction where the objective is to determine maintainable earnings by ringfencing non-recurring income and expenses that might otherwise not reflect in the income statement under new ownership.
It would be naïve to suggest that these non-recurring expenses or even losses directly attributable to the effects of the COVID pandemic can simply be written out, but negotiations are bound to include provisions for such abnormalities. One can expect deal structures to include deferred compensation - or earn out provisions - that will be triggered when the business demonstrates a return to prior performance and a resilience to the COVID impacts.
At Benchmark International, we have gone as far as to suggest to some clients they create a COVID-19 income statement line item in which to capture the additional expenses/ losses that will arise due to this once-off event, a list of examples is below;
- Lost Productivity
- New IT infrastructure
- Bad debts
- Increased provisions imposed by auditors
- Underprovided items now expensed (i.e. leave)
- Divisional shutdowns
- Bridge financing
- Fixed costs (like rent which is possibly redundant for a period) to be made to be variable
- Additional safety and hygiene costs
- Forex losses or gains
With proper records of these types of expenses, it is possible to defend the adding back of expenses to earnings for the purpose of acquirer valuation in the future.
More often than not, the topic "asset vs share sale" has been discussed and debated at length. Although there are some aspects to consider, that could be beneficial to both parties and solely for the benefit of the other. Below are a few aspects to consider when deciding on a share/asset sale:
Sale of shares transaction:
In layman's terms, a buyer would be acquiring the incorporated business. This would include the assets and liabilities, goodwill, and inherent aspects of the business that would not have been capitalised.
The valuing of any business can prove to be a particularly complicated exercise. There are various aspects to consider as well as some key financial indicators. There may be sound reasons as to why specific objectives were not met in the past, but it is important that the buyer is aware of these permutations and understands the reasoning behind it. Likewise, a buyer would also be able to see opportunity/value in certain revenue streams, whereby the seller has been unable to secure orders in the past due to a variety of reasons. In a South African environment, Black Economic Empowerment status, vendor registration with key customers, integrated systems and technology, etc. are all aspects considered as intangibles and have been proven very difficult to value. These are often subject to interpretation and most of the time the buyer would find reasons to reduce the company's value, purely because of personal interpretations and assumptions made.
In many cases, all shareholders are not always amenable to selling their share portion, as they might have alternative motives or plans for the business. To reach a successful outcome, it is important that all key stakeholders reach a consensus from the onset of the overall strategy and growth plan that they would like to achieve. The Articles of Association and/or the Shareholder Agreement may restrict shareholders from selling their shares.
Third party approval of the transaction is sometimes required, and this can often prove problematic and delay or even completely nullify the deal. An example would be a Landlord that often proves difficult when it comes to transferring the lease to a new owner. Their lawyers may require the buyer to come up with large deposits, provide personal guarantees, agree to a higher rental or require the new tenant to extend the lease term. This could prove detrimental to the transaction and there is a fine line to balancing the objectives of the respective parties.
From a seller's point of view:
- The sale: A share sale would be regarded as the simplest way in disposing of a business. Subject to any arrangement/warranty commitment agreed between the buyer and seller during an agreed period, the seller would be relieved from his/her obligation.
- Time: The seller may want to expedite the sale, however a purchaser will take his time when deciding on an acquisition. They would want to examine as much information as possible, extending the length of time to complete the transaction. Sale of share transactions typically takes longer to complete than the sale of asset transactions.
Furthermore, the buyer's legal team and advisors will insist on various protections for their client and would want the seller to provide warranties, guarantees and indemnities to limit any risk on behalf of the purchaser. The negotiating of these terms can also contribute to further delays in the successful completion of the transaction.
- Personal sureties: Over the years, the seller may have offered personal sureties to various parties.
When selling a business, these parties will generally not want to release or waive any sureties that are in place or transfer them to the new owner. These loans/liabilities will generally have to be cleared by the seller if he wants to be relieved of his/her responsibilities under the personal surety
If the seller fails to remove himself as a surety, he/she will put themselves in an onerous position and is exposed to risk in the sense that he/she has no control of the business, once sold.
- Professional fees: Share sales are more expensive when it comes to professional fees as there is usually more work involved, during the due diligence phase and the legal process.
From a buyer's point of view:
- Tax advantages: Should there be an accumulated loss existing in the company, those losses can usually be carried forward to be written off against future tax liabilities.
- Risk: Buying shares is a lot riskier for the buyer as they would be taking on all the business liabilities, and the true nature/cost of some of the liabilities may not be fully apparent until a year or two down the line. There could also be liabilities that the buyer had not discovered during the due diligence process.
- Transfer: Generally, customers and suppliers' relationships would transfer over seamlessly. The business continues operating without any major interruptions and by acquiring the shares, the buyers become owners of the assets (tangible & intangible) and associated liabilities.
Asset sale transaction:
As mentioned earlier, the buyer would prefer an asset sale as opposed to a share sale. This is purely because the buyer would have identified the key assets to produce future income, not take ownership of any associated liabilities, and would limit their exposure to unidentified liabilities held against the company.
A buyer would be able to write off wear and tear allowances against the assets purchased, thereby creating a favorable tax structure for the acquirer.
In terms of an asset valuation, this can also prove to be very complicated as there are a couple of methods of determining asset value, with the following methodologies applied:
- Value in use
- 2nd hand value
- Book value
- Replacement value
- Expected useful life (Overall state of assets)
A buyer would normally dictate the method to be used, however there must be a consensus between the seller and the buyer when determining a value.
A buyer would typically drive an asset value down as far as possible, but would need to substantiate this together with independent valuations, market trends and foreseeable production. Similarly, the seller would like to ensure his value is protected and supported by trade history and sound future projections.
Intangible assets such as patents, trademarks and customers lists are always difficult to value. However, when they are backed with a legal document that helps create barriers to entry or where a service level agreements have customers tied in with long-term contracts, this assists the buyer in determining value and alleviates the seller from encouraging the buyer.
From a seller's point of view:
- Better negotiating power: As buyers prefer to buy assets, the seller can often negotiate to get a higher net benefit for himself under an asset sale than a share sale. The seller is taking on the responsibility (and cost) of clearing the liabilities and would therefore require a higher reward.
- Quicker sale: As there is less due diligence required for the buyer to perform in an asset sale, the transaction can often be completed more quickly.
- Retained assets: The seller can choose which of his assets will be sold and which will be retained.
- Taxation: Sellers will be exposed to CGT as well as withholding tax.
From a buyer's point of view:
- The due diligence process is less cumbersome and far easier; Assets still need to be thoroughly assessed and the true value of the assets needs to be determined. However, less emphasis needs to be placed on creditors, as these assets will be unencumbered, once sold.
- Tax advantages: The buyer will in many cases be able to attribute the purchase price as the base cost of the new asset, and accordingly be able to claim wear and tear allowances against a greater amount.
When the buyer purchases assets from the seller's company, they may agree on a value for the entire set of assets, however the assets could later be revalued, once recorded in the books of the acquirer.
- Loss of customers: It is important to effectively communicate to all customers the change of control and ensure there is minimal disruption to any client relationships.
- Suppliers: The same applies to suppliers, and the sale needs to be effectively communicated with each supplier to ensure that critical relationships are not hindered.
- Assets transferred: Where there are numerous individual assets - there are different routes to securing the title and can prove to be a time-consuming exercise. For example, the transfer of a licence works differently than the transfer of a lease, which works differently than the transfer of patents.
For a variety of legal, accounting and tax reasons, some deals make more sense as share deals while others make more sense as asset deals. Often, the buyer will prefer an asset sale while the seller will prefer a share sale. The decision on which route to go will be imperative and forms as the crux of the matter for every negotiation required to conclude a transaction successfully.READ MORE >>
Aquatic Foods (PTY) LTD was established in 1996 to service leading restaurants, hotels, caterers and wholesalers by supplying live, fresh and frozen seafood on demand. After securing a broad customer base in South Africa and earning a reputation as a reliable and sustainable supplier, Aquatic Foods (PTY) LTD made the decision to expand their product offering to existing customers, using their established distribution network.
This led to the incorporation of National Foods (PTY) LTD in 2012, which distributes chilled and frozen products such as meat, dairy and pastry products.
Aquatic Foods (PTY) LTD and National Foods (PTY) LTD have successfully established themselves as a leading food services organization with a majority market share in the Western Cape. The company’s modern cold storage facilities and sophisticated stock control system enable it to hold significant inventory, thereby reducing stock risks and ensuring reliable and consistent delivery of high-quality products.
Michael Niese, founder and shareholder of both Aquatic Foods and National Foods, commented on the transaction saying, “Considering the transaction size and the respective intricacies thereof it was concluded exceptionally well without any difficulties. This I attribute to the skill and productivity of Benchmark International and the spirit of Econo Foods.”
The acquirer, Econo Foods (PTY) LTD boasts a nationwide chain of 18 outlets specializing in frozen and chilled food products. With over 100 refrigerated trucks operating among their five distribution centers, they successfully supply the wholesale and foodservice trades with frozen, chilled, and grocery lines throughout the Free State, Gauteng, Northern Cape, North West, and Lesotho regions.
Pleased with the outcome, Henk Smith of Econo Foods (PTY) LTD said “It was a pleasure to work with the Benchmark International team.”
Tiaan Smit, Transaction Director at Benchmark International added, “Throughout the process, both our client and the acquirer were exceptionally responsive, thorough, and professional, resulting in discussions progressing quickly and delivering a fantastic and timely result for both parties. I am delighted that our client was able to monetize the great business he has built while handing the keys over to an organization that will carry on his legacy as Econo Foods grows the business to the next level.”
On behalf of everyone at Benchmark International, we would like to wish all parties every success for the future.READ MORE >>
Get Your Business Showcased At The Local Industry's 'Must Attend' Event
Benchmark International is pleased to announce that we will be contributing material to the attendees’ welcome pack at the SAVCA Southern Africa Industry Conference from February 25th-27th at the Spier Wine Farm.
In 2019, the SAVCA Conference attracted 437 Private Equity delegates and 195 Venture Capital delegates who represented local and international institutional investors, fund managers, advisors policy makers and entrepreneurs.
Would you like to be showcased to these industry leaders with strong, acquisitive appetites? We will be including a limited number of client investment profiles in the flyers which will form part of the delegate bags. Contact us now to ensure your business is included.READ MORE >>
Benchmark International (South Africa) is proud to be recognised and shortlisted in the category of Best Independent Advisory Firm alongside some of South Africa’s most recognised corporate finance brands.
The Awards were created to honour and generate both industry and public recognition of the outstanding efforts and accomplishments of Service Providers covering Africa.
The 2019 awards shortlist was announced in mid-September and the black-tie event and ceremony will be hosted on October 24th at the Radisson Blu Sandton, Johannesburg, South Africa.
Benchmark International’s nomination was motivated by the consistent year on year growth in transaction activity and success achieved in transactions across the spectrum of M&A and corporate finance disciplines.
About Benchmark International:
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximising solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.READ MORE >>
While still managing to avoid a downgrade in April, South Africa has found itself at a crossroads of uncertainty since Moody’s Investors Service’s bleak budget reaction that sparked junk status fears for the country.
The speculation about the credit downgrade has been amplified by the fact that South Africa is in the middle of an election year – a factor that has also been blamed for a decrease in foreign investors’ confidence in the South African market.
An analysis of mergers and acquisitions (M&A) activity pre-and-post downgrades in Brazil and Greece suggest that although foreign investment will not end, investors do adapt their investment portfolios to align to the parameters of their investment mandates.
Government bonds and treasury securities become largely un-investable instruments post a sovereign downgrade. However, statistics suggest that while capital outflows are a reality, some funds do remain behind in these countries, and new funds do flow in. These investments will naturally seek viable and alternative high-return investment opportunities – options often presented by M&A. One theory that emerges from this analysis is that mature economies have more stable but lower growth rates. While developed economies also represent a seemingly lower risk, they do not offer sufficiently high returns.
In order to achieve the required overall return on investment in a risk-on environment following a credit downgrade, fund managers will inevitably still require some form of investment in emerging markets.
In order to understand the impact a credit downgrade has on M&A activity in a country, we compared M&A activity as reported by Zephyr, a Bureau van Dyk company that offers a database of deal information.
We compared M&A activity before and after a credit downgrade in Brazil, which has a similar economy to South Africa due to slow growth and political instability in both countries, as well as in Greece. The raw data suggests that a catastrophic capital flight is unlikely because the sums invested may be lower and the investment profiles between the countries are different. But opportunity abounds and returns remain strong as there exists a direct correlation between risk and reward.
According to Trading Economics, Moody’s was the first to downgrade Brazil in September of 2014 for political and economic reasons. Fitch Ratings followed suit with a downgrade in April 2015. In July 2015, S&P downgraded the country too.
The Bureau van Dyk / Zephyr data looked only at transactions where the targets were Brazilian companies and considered deals that were both completed and announced each year. The transactions analysed include mergers, acquisitions, institutional buy-outs as well as venture capital and private equity.
It is evident from the data that the volume of transactions was relatively flat after the first downgrade by Moody’s in 2014. The volume of transactions decreased by approximately one-third after the remaining agencies downgraded the country in 2015.
While the total value of transactions reported also decreased, it is evident that the average transaction value in 2017 was similar to 2015. For example, the average value per transaction in 2015 was R973 million and R929 million in 2017. On a cursory view, transaction values held up well after the Moody’s downgrade.
Analysing the data for Greece, which was downgraded in 2010, the following graph illustrates the effect on both volume and values reported by Bureau van Dyk over a similar period to Brazil.
The data illustrates a clear downward trend in M&A deal values over the period of the financial crisis in 2008, 2009 and well into 2010. While there was an initial slump in volumes and a slight decrease in value immediately after the downgrade in 2010, it is only 2017 that has subsequently underperformed the deal values as they were similar to levels seen in 2010. Again, the average deal size in the period following a downgrade is shown to have increased.
The data analysed makes no currency or inflation-related adjustments. And the data, being Euro-denominated, indicates that the M&A sector remained resilient even after credit downgrade events.
Although Moody’s did not downgrade South Africa to junk, the data from Greece and Brazil does indicate that deal flow will not evaporate should this happen. Volumes may initially drop but average deal values can be expected to increase.
While we continue to work to avoid it and acknowledge the punitive impact thereof, the statistical reality is that a downgrade is not likely to be as detrimental for the M&A sector as otherwise perceived.
T: +27 (0) 21 300 2055
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Benchmark International’s South African office has experienced a sharp increase in deal flow and activity. The company reports having received 51% more non-disclosure agreements from interested parties and a 71% increase in the number of offers received for client businesses than in the corresponding period last year.
The volume of transactions concluded by Benchmark’s South African office confirms the positive trend identified in the recently published Intralinks Deal Flow Predictor, which relies on early-stage transaction forecasts compiled from data on M&A due diligence activity in virtual data rooms. The predictive models for the second half of 2019 suggested an increase in the number of deals to be announced in the order of 5% for the EMEA region.
Benchmark International—demonstrating this trend—is pleased to have facilitated the following transactions in recent weeks:
- The investment by way of share subscription in Shift South (Pty) Ltd, trading as SweepSouth, by MIH Holdings, trading as Naspers Foundry
- The sale of a majority interest in Counterpoint Trading 439 (Pty) Ltd to Shave and Gibson Packaging (Pty) Ltd
- The merger of two undisclosed prominent e-commerce companies
- The disposal of Groupline Projects (Pty) Ltd by Wonderstone Ltd who are in turn owned by the JSE listed group Assore Ltd to Mokoena Holdings (Pty) Ltd
- The sale of Muffin Mate Coastal (Pty) Ltd to Ekuzeni Supplies (Pty) Ltd
- The sale of Jordan Human Resources to Vinton Holdings (Pty) Ltd
- The sale of an undisclosed mining equipment manufacturer to an undisclosed Canadian equipment supplier
- The acquisition of Ciba Packaging (Pty) Ltd’s non-core flexible food assets by Lampac CC, trading as Packaging World
- The sale of Nology (Pty) Ltd and Nology Distribution (Pty) Ltd to a multinational technology holding company
Commenting on the transactions, Andre Bresler, Managing Partner at Benchmark International’s South African office, remarked, “The range of transactions is a testament to the maturing M&A landscape in South Africa as well as the depth of the Benchmark team as these nine deals represent a very broad spectrum of M&A activity—from a capital raise to a merger and both partial and full disposals. There are private equity and trade-buyer deals, cross-border and domestic transactions, an acquisition, and even the disposal of a non-core asset of a listed entity. It’s certainly an exciting time for M&A in South Africa with no significant slow-down expected; we anticipate a number of additional transactions to finalize in the last quarter too.”
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Benchmark International’s South African office was proud to attend the unveiling of this year’s private equity survey conducted by the South African Venture Capital Association (SAVCA).
Once again, private equity in South Africa has demonstrated the robust nature of the local market by posting a significant increase in investment activity in 2018.
The survey reports the value of new and follow-on investments has reached R35.4 billion, more than double the annual average of R15.2 billion posted over the past decade.
The research has further revealed that Southern Africa’s private equity industry (comprising both government and private funds) boasted R171 billion in funds under management (FUM) as of 31 December 2018.
More pointedly, the facts allude to a significant spike in trade sales, which were the most popular transaction, equating to a value of R5.6 billion in the past calendar year.
This further solidifies the dynamic reputation of the local mid-market sector of the economy and bodes well for the near and mid-term investment cycle for South African business owners looking to grow, transform, or exit their businesses.
Additional key takeaways from the survey include:
- R171 billion in funds under management (FUM)
- R12.8 billion was raised in 2018
- 55. 5% of the funds have been earmarked for South African investments
- Real estate comprised 15% of the value of all unrealized investments at 31 December 2018, with manufacturing and retail accounting for 11.6% and 10.8%, respectively
- Average investment deal size increased to R43.3 million during 2018, from R41.5 million during 2017
To obtain the survey results, SAVCA, along with its research partner Deloitte, surveyed 47 managers, representing 82 funds, with a mandate to invest in South Africa and in other African markets.READ MORE >>
Benchmark International has successfully facilitated the sale of its client, Machine Cutting Services to Montsi Investments, a 100% black-owned family investment company operating in South Africa and Ghana.
Machine Cutting Services, based in Modderfontein, South Africa, offers on-site machining services, products sales and rentals to, inter alia, the power generation, petro-chemical, mining, paper and sugar milling, and heavy engineering sectors. The company is an agent and distributor of prestigious, global brands of on-site machining tools as well as top quality plumbing tools.
Montsi Investments recognised the value in adding MCS to their stable of investments, which includes companies such as aggregate producers in South Africa and Ghana. Through their acquisition of the company they plan to expand its geographic footprint in Africa and leverage the improved B-BBEE score to secure new business.
“With a prior attempt at selling the business by another advisory having been unsuccessful, I was beginning to think I’d never get to retire, but the Benchmark team really came through for me and delivered on their promise to assist me in finding succession for my business”, stated the seller Mr Derek Holliday, adding “I felt well supported by Johann throughout the sale process. His expert guidance was invaluable.”
“We knew that a completely fresh approach to a wider market would be required” says Johann Haasbroek, the Transaction Director at Benchmark International. “The buyer was identified through the Benchmark process and once we conveyed the unique advantages that they would gain by acquiring the business; such as the growth that could achieved though the company’s superior ability to navigate the South African legislation in which the company operates, the buyer saw the potential for growth and engaged.”
Encouraged by what the deal indicates about the South African M&A industry, Andre Bresler the Managing Director at Benchmark International, concluded “This transaction is testament to the ever-increasing maturity and success of the BEE industrialist and investor market where strong interest was forthcoming from a number of strategically motivated buyers with impressive portfolios and track records of success, capable of adding genuine synergistic value.”READ MORE >>
Benchmark International is pleased to announce the sale of AVIS Forklifts (Pty) Ltd (AVIS) to Sky Investment Holdings (Pty) Ltd through its subsidiary Tailifts South Africa (Pty) Ltd (Tailifts).
AVIS is an independent forklift company, established in 1970. With over 40 years in operation, it is well recognised as a pioneer in the forklift rental industry. The company has grown to provide a comprehensive range of services regarding materials handling equipment including forklift hire, forklift sales, transport solutions and side lifter facilities. The company’s infrastructure is geared toward providing its customers with a cost-effective materials handling solution.
Tailifts prides itself on the manufacture and maintenance of tail lifts that can be fitted to column, cantilever, foldaway and retractable lifts suitable for any industry. In addition, Tailifts is the sole distributor in Southern Africa for Zepro, Waltco and Del lifts, market-leading brands in Europe, the USA and the UK respectively. The company boasts authorised service and fitment agents in all of the main centres within South Africa and engineering staff are trained and certified ECSA engineers as well as registered lifting machinery inspectors.
The transaction sets the groundwork for both businesses to leverage off of each other’s mutually advantageous basket of products and services while aggressively nurturing their newly augmented and combined national footprint.
Commenting on this, Andre Bresler of Benchmark Corporate South Africa said: “This is yet another transaction that demonstrates in such active sectors going to market in a competitive process unlocks real value beyond the balance sheet for buyer and seller alike. I could not be more pleased to see such uniquely suited entities joining forces, it has been a privilege for Benchmark to have been selected to advise such an iconic brand.”
On behalf of everyone at Benchmark International, we would like to wish both parties every success for the future.READ MORE >>
Benchmark International is pleased to announce the completion of a transaction between Logicalis South Africa (Pty) Ltd and the Clarotech group of companies including Clarotech Holdings (Pty) Ltd & Clarotech Consulting (Pty) Ltd. The deal was concluded by the transaction team based at the mid-market M&A corporate advisory’s African headquarters in Cape Town, South Africa in August of 2018.
The Clarotech group of companies specialise in Information and Communications Technology (ICT) providing consulting, physical product and support services to businesses throughout Southern Africa. Operating since 2001, the company satisfies the need for advice, solutions and ongoing service. Clarotech’s aim is to simplify ICT by supplying relevant solutions of value through proven end-to-end methodology.
Logicalis is an international multi-skilled solution provider supplying digital enablement services. The business boasts a well-curated customer base where it advocates for some of the world’s leading technology companies including Cisco, HPE, IBM, CA Technologies, NetApp, Microsoft, Oracle, VMware and ServiceNow. The Logicalis Group has annualised revenues of over $1.5 billion, from operations in Europe, North America, Latin America, Asia Pacific and Africa. It is a division of Datatec Limited, listed on the Johannesburg Stock Exchange, with revenues of over $4 billion.
The similarities in business strategy, culture and ethos between the two companies have made this acquisition a “natural fit”, says Colin Fair, Managing Director and owner of Clarotech. “For the past few years, the management team has been looking for a company who could be a partner for us, one that would allow us to create something special from the marriage. We have been seeking a 1+1=4 scenario that would benefit our customers and our staff. This is what Clarotech has found in Logicalis.”
Commenting on this, Andre Bresler of Benchmark Corporate South Africa said: “This transaction affirms many analysts’ predictions of a positive climate for M&A in the TMT sector for 2018. Whilst there was defined interest from both up and down the supply chain in this acquisition, the strong cultural fit and clear synergies offered by the ultimate acquirer were evident from the outset. It has been a real privilege to have a hand in such an outstanding result for such outstanding clients.”
On behalf of everyone at Benchmark International, we would like to wish both parties every success for the future.READ MORE >>
Benchmark International is pleased to announce the successful merger between the off-site monitoring division of Corporate Security (Cor-Secure (Pty) Ltd) and Off-site Monitoring (Pty) Ltd (OSM)
Established in 1984, Corporate Security has extensive technical knowledge and experience within the South African security industry. The company offers a range of security services, focusing on the design and installation of off-site monitoring (OSM) and other technically orientated security products.
Utilising select imported and local security products; Corporate Security offers a substantially more cost-effective security monitoring option boasting proven efficacy. The company’s 14-year investment in the Control Room has culminated in a state-of-the-art off-site OSM CCTV control station as well as an analytics system.
Off-Site Monitoring (Pty) Ltd offers its customers a premium 24-hour surveillance service for essential day-to-day systems and security.READ MORE >>
The Benchmark South African Office has experienced extraordinary growth in the ten months following the company’s investment in Cape Town in response to demand to grow the African operations. The team is therefore proud to announce the opening of its Johannesburg office, the largest city in South Africa and one of the 50 largest urban areas globally.
Strategically, this expansion positions the company’s additional operations near the heart of the country’s wealthiest province, a full three months ahead of schedule. The early establishment of an office in this node was a decision necessitated by the level of activity Benchmark is engaged in with clients and buyers alike, and demonstrates the company’s continued
commitment and growing presence on the continent.
As a country, and in the context of Emerging Markets, South Africa has unparalleled potential as a destination for direct investment and features as one of the most dynamic and rewarding emerging market economies across the globe. As an M&A target region South Africa was recently ranked as the 28th most attractive destination for inbound M&A transactions globally. (According to Zephyr, a product of Bureau van Dijk).
Benchmark International’s Johannesburg office is headed up by Johann Haasbroek who, having worked with many of the current Benchmark team in the past, has extensive M&A, Corporate Finance and Banking experience.READ MORE >>
A fascinating report has been published by Intralinks who, in conjunction with Cass Business School in London examined 23 years of data from almost 34,000 companies worldwide to identify the factors that make companies attractive M&A targets.READ MORE >>
Benchmark International has recently opened a new office in Cape Town, South Africa (see 3rd July blog post), headed up by Andre Bresler and Dustin Graham. This is an exciting development for Benchmark International, in a dynamic evolving market.READ MORE >>
A Manchester-based M&A specialist has expanded into South Africa with the opening of an office in Cape Town.READ MORE >>