Shareholder diversification and/or BEE ownership

portfolio companies

What should the ideal BEE ownership deal offer you?

  • Firstly, you should be dealing with a trusted counterparty with similar entrepreneurial values and strong transactional experience who understands the emotional journey that goes with starting, growing and then selling part of your business. Especially when you don’t really feel like it or don’t want someone else telling you what to do. Don’t confuse a ‘professional’ in a suit for someone truly entrepreneurial who understands the emotional journey you’re going through.
  • The deal structure itself needs to be 100% legitimate. The BEE ownership structure must meet any test, not expose you to risk and let you sleep at night. If your gut tells you it’s not “real” BEE then walk away. If you have to ask ‘where’s Wally’ to find the beneficial BEE shareholder then don’t do it. If the solution is being punted by people who don’t have their own money at risk in the long-term then be very careful.
  • The valuation of your business must be fair to both buyer and seller.  Yes this is BEE. Yes this is (often) minority stakes. Yes you will probably have unrealistic expectations. A fair valuation process builds trust and gets the relationship off to a good start, from which you build value together. This is a marriage after all.
  • The deal terms are just as important. Many people get a price (valuation) they’re happy with but sign deal terms that are unfair and only find this out years later. Terms must be clear, fair and incentives aligned. You must ask, and know, what happens if things go bad.
  • Any ownership deal needs to put cash into the business for growth (if needed), or to offer cash/equivalents to shareholders for diversification. The deal shouldn’t end up with you in a more concentrated risk position.
  • The ownership structure should be long-term, because what’s the point of doing a deal now only to repeat it in a few years time? Understand the motives of your counterparty. Is it their money or someone else’s? What returns do they need before they make money?
  • Your new BEE owner/shareholder needs to add value to the business but not interfere too much. This isn’t easy to get right. Governance and growth must be balanced. Your expectations of how they’ll add value must be clear from the outset and agreed in writing. There is plenty of pain in deals where expectations of what happens after the deal are not managed. Disappointment leads to poor shareholder relationships.
  • The deal process should be light/quick as possible. It takes experience to know where to focus efforts and which clauses to stick to and which to concede on. A trusted counterparty will explain everything to you in plain English and help you conclude a deal with minimal distraction to the management and growth of the business now.

Tusker Portfolio companies get

  • 100% legitimate long-term BEE ownership (20% to 100%), and/or
  • A partial exit/diversification (letting you diversify risk and take money off the table)
  • Increased value through solid governance and a world-leading growth program
  • At a fair price in a quick, standardised deal
  • Where you don’t lose control of your business.

The Tusker founders are entrepreneurs like you, and have over 60 years of transactional experience ranging from seed-stage deals to MBOs to exits to sovereign funds. Our experience includes South Africa, Mauritius, ‘Rest of Africa’, London, EU, USA.

We’d love to explore how we can help – please contact us using the form below.