Why being bought out by a foreign multinational isn’t always the best option: Local is lekker!

Amina Pahad

Successful companies often dream of being bought out by a big international player. It can mean brand recognition, international expertise and perhaps even the chance for the founders to cash out and go and lie on a beach somewhere.

It takes a special kind of company to say no. Cargo Compass is such a company. This fast-growing freight-logistics business had been sounded out by a couple of multinationals seeking to establish a footprint in the country; but they came to RMB Ventures instead for a local private-equity solution.

It’s not every day that we are chosen by a company that has a clear vision of the next phase of its growth, and how it plans to get there. They knew exactly what type of partner they needed. Indeed, they had a shopping list, so to speak.

Firstly, they wanted authentic BEE credentials (and not just a “scheme”) so that the company could be 51% black-owned. This was no trivial concession for the majority shareholders, an entrepreneurial brother-sister duo, Angela and Sebastiano Iorio.

Barely 20 years ago, they risked what little capital they had to start a small freight-forwarding business. On the back of an innovative and customer-responsive service offering, mainly to SMEs, Cargo Compass has expanded rapidly into one of the largest local independent freight forwarders, offering import and export forwarding, customs brokerage, warehousing, distribution and marine insurance. A telling indication of its success is that it has done some of its best growth in the struggling economy of the last few years. The BEE shareholding will help unlock new business opportunities and ensure existing customers benefit from significantly improved BEE credentials. Access to the FirstRand balance sheet will allow the company to secure funding for working capital and lay the foundations for expansion and future growth.

The empowered shareholding solution posed no problem for us, as we have done countless BEE deals over the years. We were able to offer Cargo Compass a well-funded and well-constructed partnership consisting of RMB Ventures and Bopa Moruo Private Equity, with whom we’ve had a long working relationship.

Next on Cargo Compass’ shopping list was the strengthening of the company’s foundations. That meant bolstering their systems, improving their financial controls to handle new growth, and exploring trade finance alternatives so that they can offer customers help with funding, forex and other specialist services. Here’s a company that’s been massively successful, and yet has the humility to know what it needs to do better.

We are able to help Cargo Compass in these areas by virtue of being a financial institution. And as part of the diversified FirstRand financial-services group, we have automatic access to skills and experience in trade-related areas such as funding, forex and insurance.

The third item on Cargo Compass’ list was a desire to maintain its successful entrepreneurial culture. Staff work within a sensible rather than bureaucratic framework of regulations, and are encouraged to find innovative solutions for customers.

This way of working is easy to lose when a big shareholder comes on board Fortunately, there is a good culture fit with RMB, which still maintains the entrepreneurial spirit of its founders and understands the value of an owner-manager culture. Indeed, our transaction makes an entire layer of Cargo Compass managers shareholders in the company, which further enhances its entrepreneurial culture.

There are additional benefits too. RMB has an investment presence in some 30 African countries, opening up trade possibilities. And we at RMB Ventures have 20 other successful companies in our private equity portfolio, many of them involved in importing; that’s more doors that can be opened. Finally, we can guide growth and investment at Cargo Compass over the longer term and in the company’s best interests. That’s because, unlike traditional private-equity funds, we have significant flexibility around our investment horizon.

Our growth partnership with Cargo Compass promises to be an exciting one. It represents one of the biggest upfront cheques we’ve ever written. And, ironically, it makes the company even more attractive for potential international investors in the future.

Amina Pahad is a private equity transactor at RMB Ventures.

This post is sponsored, written and provided by Rand Merchant Bank.