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Virtual Round Table – Bankruptcy & Restructuring Round Table 2017

Wessel Jacobs, Jacobs Capital Chief Executive Officer

Jacobs Capital is a private equity and business advisory firm with a proven track record and a reputation in business rescue and the effective implementation of turnaround strategies.

Our team is led by CEO, Wessel Jacobs, an expert in implementing turnaround strategies which result in increased output, reduced waste, raised efficiency and improved financial performance in both performing and under-performing companies around the world.

With his experience and track record within the restructuring space, Wessel was invited to impart his business expertise at a Virtual Round Table discussion focussing on bankruptcy and restructuring.

The Virtual Round Table is an initiative run by Corporate Live Wire that brings international business leaders together on a digital platform to discuss various business topics. Wessel joined other successful businessmen and women from around the world to share his unique views on bankruptcy and restructuring in a South African context.

Find his exclusive interview with The Virtual Round Table below.
Click here to read the full Virtual Round Table discussion.

Q) Can You Outline The Current Bankruptcy And Restructuring Landscape In Your Jurisdiction?

A) The South African economy has been in a low-growth trajectory for several years, with two successive quarters of negative growth at the end of 2016 and the beginning of 2017 which placed the country in a technical recession. A widespread drought, weak international commodity prices, political uncertainty, credit rating downgrades, high levels of unemployment and labour unrest, and weak consumer spending all contributed to the country’s financial woes.

Since then South Africa has emerged from recession with 1% year-on-year growth, but business confidence is still at record lows. Many businesses struggle to grow revenues and profits. This has created constraints in working capital and cashflow, putting pressure on financial commitments to banks and trade creditors.

Under these conditions, the threat of business insolvencies is high. Business restructuring is therefore likely to face a growing demand.

Q) Have There Been Any Recent Regulatory Changes Or Interesting Developments?

A) There are many reasons why businesses fail, but in many cases a business is only experiencing a temporary setback. A business rescue programme and some breathing space could lead to recovery. It is easier to rescue a business than to create a new one, and allowing businesses to survive helps create a strong economy.

The introduction of business rescue proceedings in terms of Chapter 6 of the Companies Act No 71 of 2008 was therefore welcomed. It provided an alternative to the traditional insolvency proceedings by introducing measures to facilitate the re-organisation and restructuring of struggling businesses. It allows a business to survive as a solvent entity, or at the very least result in better returns for creditors or shareholders than they would receive in liquidation proceedings.

Unfortunately the legislation is badly drafted and extremely vague. The process is also not effectively or efficiently regulated. We are forced to rely on interpretations provided by case law, which is not always consistent. Another problem in case law is that specific facts and circumstances in our projects do not fit squarely into the facts of the judgment that we have to rely on.

We have also witnessed abuse and mismanagement of the business rescue process which has resulted in businesses closing their doors when they in fact had the potential to survive.
But despite the many regulatory, drafting and interpretation glitches in the legislature, it is a step in the right direction.

Q) What Is The Process For Asset Recovery In Your Jurisdiction?

A) There are a number of options available to recover assets from an entity. In our experience the most effective is to ensure that proper security is obtained through the registration of a combined special and general notarial bond. A special notarial bond lists specific moveable assets, with identifiable features such as serial numbers. A general bond refers to any remaining moveables in the business and the operation of the business, including any goodwill, intellectual property, machinery, fixtures, vehicles, cash and access to bank accounts, as well as servers. The bond is registered in the deeds office.

In the event of a default, an attorney can bring an application to court to perfect a bond within a few days. An interim order is issued that authorises the sheriff of the court to take into possession the moveable assets listed, as well as all raw materials, shares, goodwill, licenses and loan accounts, and to operate the business in order to maintain goodwill. Within a relatively short time, the matter is finalised in court with a return date where the debtor is given a chance to object to the order obtained. If there is no objection, the order is made final. Usually by this stage the matter has been settled.

Practically, this is most effective manner of recovery because the original court order is obtained on an urgent basis without notice to the debtor. This means that directors or shareholders of the debtor do not have the chance to move or hide any assets. It also means that the sheriff arrives at the business premises of the debtor unexpectedly and takes over his business, potentially ejecting the directors from the premises if necessary. The sheriff can sell goods, place orders, dispatch goods and run the business until the matter is in court again. Depriving a director of control of his business is usually an effective way to convince a debtor to settle and allow you to recover the asset, whether that asset is in the form of a loan or moveable property.

This is an extreme and aggressive remedy, so although it is very effective, it should be used with caution, and only in default of large asset recoveries.

Q) Which Sectors Are At Highest Risk Of Bankruptcy In The Current Business Landscape?

A) Sectors such as manufacturing and mining face the highest risk in our current economic landscape because they rely on resources such as labour and energy. The lack of available skills, shortage of training opportunities and strained employer/employee relationships contribute greatly to this risk. In addition, the South African market – being small – has much lower volume demands. This makes it difficult for these sectors to be globally competitive when faced with high-volume automated competition. The continued shortage of energy, and the steep increase in energy costs, collectively extend this cost curve in South Africa and prevent competitive output. These factors further lead to a lack of investor confidence in these sectors which then affects other investor confidence in the design, automation and skills development sectors.

Q) Have There Been Any Recent Notable Bankruptcies Or Restructurings? Are There Any Lessons To Be Learned From These Case Studies?

A) The restructuring of Masonite Africa Limited to Evowood Pty (Ltd) is the most notable turnaround achieved by Jacobs Capital Pty (Ltd).

Masonite Africa Limited was a listed entity that was acquired by Jacobs Capital and Blackbird Capital after being placed in business rescue. As a first step, the forestry assets were sold and the proceeds used to inject much-needed capital into the hardboard producing mill in Estcourt in Kwa Zulu Natal.

The name was changed to Evowood Pty (Ltd) to create a new business with a new business strategy and focus.

But despite more than R100 million investment in the first six months, the restructuring was dealt a serious blow when organised labour – representing around 450 of the 700 employees – reneged on an agreement and embarked on an illegal strike for several weeks. This effectively brought the business to its knees. Shareholders decided to liquidate the business as losses seemed beyond recovery.

However, an executive management team led by CEO Louis Marais, with members of the Jacobs Capital turnaround team, agreed to test a new downsized model. This plan was supported by shareholders, on condition of some challenging risk-mitigating constraints.

The outcomes have been very positive. Over the past few months the production and sales targets continue to be met and exceeded. The business operates at break-even and has recently even become profitable.

About 70% of the model has been effectively implemented to date. Around 400 people have been re-employed by the company and a potential disastrous blow to the town and community of Estcourt has been avoided.

The business continues to grow from this base. More people are being employed, while shareholders and investors are already raising capital to increase capacity.

An aggressive marketing plan has educated consumers on the benefits of hardboard over substitute products and greatly increased demand.

A primary lesson learned during this process was clearly to define the model, and then create a plan to implement this business model. A clear and transparent communication strategy should run concurrently with this implementation plan to ensure the support of all stakeholders. It is vital to have the desire and confidence to succeed in the face of severe obstacles. The implementation team requires trust and support to use their respective skills, despite setbacks which at times might seem disastrous. An important aspect was to stay focused on the goal and not be distracted by challenges.

The Diverse Skills Required to Unlock Value and Drive Enhanced Business Performance

From left to right: Wessel Jacobs (Chief Executive Officer), Nola Esselaar (Legal and Business Advisory), Quintin Terreblanche (Business Advisory and Investment Management), Leon Raubenheimer (Property Specialist and Business Advisory), Craig Duff (Branding Marketing and Business Advisory) and Jeanne Terreblanche (Business Advisory and Investment Management).

Private equity firms seeking to create value and drive business performance require a diverse level of skills, knowledge and experience within a collaborative team. CEO of Jacobs Capital, Wessel Jacobs, says that expertise across disciplines such as deal making, legal, property transactions, business analysis, operational restructuring and branding enables private equity companies to effectively unlock value, perform successful turnarounds and implement performance enhancement projects.

At Jacobs Capital, much of their success has come through their approach to deal making and value creation. Marc Thom and Tyrone Bricknell head up Jacobs Capital’s in-house private equity and transaction advisory division and bring over two decades of experience in deal origination and investment management to the team. According to Thom and Bricknell, real value is created in the initial stages of each transaction.

“Irrespective of whether you are dealing with a standard private equity deal or a distressed asset in need of turnaround, value creation always starts at the very beginning,” says Thom.

Bricknell agrees adding that, “Unlocking value and managing risk is never simple, but it’s a great deal more plausible if you have the right range of expertise on the team”.

This range of experience and expertise enables the Jacobs Capital team to view investments differently and identify viable investment opportunities where others may not.

“From the outset, even at a due diligence level, our team’s operational experience and entrepreneurial backgrounds allow us to consider the operational integrity of each business investment carefully, over and above typical financial and legal reviews,” says Jacobs.

Each transaction presents a considerable amount of complex legal issues which need to be addressed. As a result, the importance of having an experienced legal team to manage these issues from the outset cannot be undervalued.

The legal team at Jacobs Capital is headed by Executive Director, Nola Esselaar. With a wealth of commercial and contractual legal experience, Esselaar works closely with the team to navigate the legal landscape of acquiring new investments. With the assistance of this experienced legal division, the team are well equipped to deal with all legal aspects relating to acquisitions, business rescue and operations, ranging from agreement structuring through to industrial relations, human resources and legal compliance.

There is often a property component within most private equity transactions and consideration needs to be given to this in order to maximise value and manage risk.  Leon Raubenheimer, Executive Director at Jacobs Capital, brings a lifetime of property experience to the team. Raubenheimer advises the professional teams on this critical component in the acquisition and management space, and provides valuable guidance to ensure Jacobs Capital consistently maximise the opportunity presented within each property asset.

Once Jacobs makes an investment and all legal requirements are in place, performance enhancement processes are immediately implemented. Executive Director Quintin Terreblanche – who drives operational restructuring within the Jacobs Capital investments – believes that the team’s ability to tailor tried and tested methodologies to suit a business’s specific needs is what enables Jacobs Capital to enhance performance over a short period.

“From a restructuring perspective, we capitalise on the hard yards made by our deal making and legal teams by putting a premium on benchmarking and operational performance. From here we develop business strategies, implement improvement projects and drive global best practice to improve business performance,” says Terreblanche.

As an accomplished business advisor and business analysist, Jeanne Terreblanche is a key player when it comes to implementing benchmarking, process management and best practice processes. Her experience in these critical areas further complements the team by contributing to their strong restructuring abilities.

The restructuring process also normally sees a long overdue focus on the operational side of the business. This is particularly apparent in a manufacturing business environment as they understand that driving operational efficiencies is always essential to delivering premium quality and competitively priced products to the market.

“We draw on operational best practices to immediately enhance business performance,” comments Quintin Terreblanche. “These include proven methodologies such as Lean and Six Sigma. However, we are able to use our experience to customise these principles to support the desired business model, and essentially create value within each business”.

Concurrent to the operational improvement projects, Jacobs Capital deploys their brand, marketing and commercial teams to ensure that the business makes an impact in the market from the outset. Executive Director Craig Duff is charged with driving these initiatives. He says, “Our role in the brand, marketing and commercial teams is to focus on reinvigorating marketing and sales to ensure that each business meets the required commercial objectives. At the same time, we ensure our marketing and advertising is focussed on building powerful brand positions within the markets in which we operate”.

Jacobs Capital understands the importance of possessing skillsets within the team that offer value which extends beyond the acquisition and into the management of an investment business. Jacobs says, “Our operational and management teams are supported by our in-house human resources division. This experienced team of HR professionals offer assistance with matters such as staff structuring, internal alignment, labour disputes and executive agreements, and bring value to the team at a post-acquisition stage”.

Over the years Jacobs Capital has prioritised and invested in building a team with the diverse range of skills needed to build an asset from deal origination to a successful brand which offers real presence in the marketplace. Today they present the right empowerment credentials and a well-rounded team that enables them to work collaboratively to consistently unlock value and drive enhanced business performance and turnaround across a wide variety of industries.

Jacobs Capital June LinkedIn Article

Why Jacobs Capital is the Right Private Equity Partner for Your Business

Businesses owners seeking private equity investment should aim to identify partners who possess proven deal making abilities, investment management skills, a solid business network and the ability to understand a business’s individual needs. A partner with these skills will not only provide capital input, but will also assist the business in navigating the complexities of private equity towards achieving business success, says Jacobs Capital CEO Wessel Jacobs.

Jacobs Capital is a dynamic private equity firm focused on assisting middle market businesses in achieving their full potential through managed partnerships.  By incorporating a proven hands-on approach and access to a diverse and highly skilled team, Jacobs Capital delivers reliable investment solutions to their partners.

As an on-balance sheet private equity company, Jacobs Capital offers investee businesses a key advantage without the usual exit timeframe pressures of fund investors. Their experience lies in mergers and acquisitions, capital raising and transactional structuring. These skills, delivered by their “investment banking” team, who are seasoned professionals in equity investments and deal origination, ensure Jacobs Capital creates value for shareholders.

In-house private equity and transactional advisory specialists Marc Thom and Tyrone Bricknell indicate that the Group’s approach delivers immediate value.

“The upfront structuring and negotiating of a deal sets the platform for its eventual success. We then create the environment and support for our management teams to focus on the “day-to-day”. All the while our affinity for commercial due diligence and experience in the merger and acquisition space allows us to strategically grow real value at a transaction level,” says Thom.

Furthermore, Bricknell suggests that Jacobs Capital’s ability to see beyond the transaction and identify opportunities has changed the way their dealmakers identify potential.

“The collective skills within our team enable us to radically impact the performance of an investment. This has driven a unique view on how we identify investment opportunities. As a result, we often see potential where others may not,” comments Bricknell.

The Jacobs Capital approach differs from traditional private equity firms. These firms often look towards improving the prospect’s profits and overall financial wellbeing as they move towards positioning the company for resale. It’s an approach that holds little value for the investee company. Consequently, Jacobs Capital focus on both short and long-term strategies. From the outset the Jacobs Capital impetus is directed at driving performance improvements with a view to ensuring profits and increased returns over a shorter period. However, Jacobs Capital simultaneously put considerable focus on implementing strategic business processes that are structured towards long-term sustainability, cognisant that sustainability drives future income and directly impacts the value of the business.

Beyond the investment realm, Jacobs Capital offers further expertise. Their capabilities include transactional, legal, operational, commercial, human resources, financial advisory, branding and marketing skills to provide extensive benefits to their investment companies.

Jacobs believes it’s all about unlocking value, and Jacobs Capital’s ability to get to the operational heart of a business and understand both the internal processes and the market enables them to offer distinctive value to their partners.

“We are not confined to high-rise boardrooms where we mull over historical analysis and forecast future projections. When required we immerse ourselves in our investments. We pride ourselves on our ability to implement performance enhancing or restructuring projects. These projects drive substantial change from the heart of the business, and we work closely with management teams to achieve this,” says Jacobs.

In light of this, Jacobs Capital are typically drawn to established investments that already have experienced and committed management teams in place. These opportunities offer a firm foundation from which they can work towards assisting the business in discovering, rediscovering or exceeding profitability margins.

Within these businesses, Jacobs Capital then implement tried and tested business methodologies that deliver improved performance and sustainability.  These processes are driven by their dynamic team of experienced business specialists.

Having headed up their own successful businesses, these specialists offer “real world” business and entrepreneurial experience. Their capabilities facilitate Jacobs Capital’s highly nimble approach to business, enabling them to pivot where necessary. This responsiveness also enables them to implement strategic business models that capitalise on opportunities in all stages of the investment cycle. Whether during the pre-screening of a transaction or an immediate intervention due to an underperforming investment, Jacobs Capital are able to rapidly deploy experts to optimise their investments.

This aptitude for driving improved performance and value impact in their investment businesses holds extensive benefits for both investees and investors. In addition, their ability to safeguard the investment and offer investors comfort and security during the investment cycle has established Jacobs Capital as a dependable private equity partner.

Critically, however, their success in private equity transactions lies in their ability to form partnerships with management teams, shareholders and their network of business experts. These partnerships allow Jacobs Capital to draw on a vast pool of resources. This ensures they are able to discover the best solution for a business and set the company on the path towards improved business results.

Moreover, Jacobs Capital promotes cohesion and collaboration amongst all stakeholders. So much so that they often invest alongside their management teams to ensure that all interests are aligned. This transparency within their partnerships enables them to gain buy in from all parties to achieve outcomes that are favourable for both the business and its investors.

“Our reputation as a private equity investor that conducts transactions in an ethical manner is testament to our commitment to fair business dealings,” says Jacobs. “We take great pride in this hard-earned reputation. It often dictates that our partners adhere to similar ethical principles to ensure that they are the right fit for our firm”.

Jacobs Capital’s track record is evidence of the effectiveness of their approach. Over the last decade, they have completed various transactions that have yielded significant returns from both deal making and performance enhancement structures across a broad spectrum of business sectors. This success demonstrates their ability for deriving extensive value from transactions. In addition, it highlights their aptitude for successfully turning around underperforming businesses to improve profit margins and drive higher performing assets.

These aspects of this highly selective investment firm make Jacobs Capital an attractive partner for those seeking to profit from a private equity structure.

If you’re considering a private equity transaction and believe that your company fits the Jacobs Capital criteria, please click here to provide us with summarised details of your transaction requirements.

Jacobs Capital June LinkedIn Article

Prosper In A New Private Equity Landscape

Delivering returns through traditional approaches will become more challenging, but opportunity awaits those who are prepared to embrace a new era of private equity says Wessel Jacobs CEO of private equity and business advisory firm, Jacobs Capital.

Jacobs acknowledges that the current economic climate may present challenges to private equity players attempting to identify attractive investment options that offer the desired returns.  Compound this with South Africa’s uncertain economic landscape and it becomes clear that the business of private equity now requires a more strategic, considered and responsive approach.

For Jacobs, implementing a modified approach to private equity in the current economic climate is highly beneficial as he believes that nimble private equity firms that have the ability to pivot and implement strategic business models have entered a world of opportunity.

Such is the case for Jacobs Capital, the private equity and business advisory firm who are finding the private equity environment in South Africa favourable as they continue to identify attractive opportunities that are delivering impressive returns for discerning investors.

Jacobs highlights that there are several top of mind issues that private equity investors need to consider in the current economic climate, including the relegation of South Africa’s sovereign debt to below investment grade (junk status) by the credit rating agencies and the possibility that increasing interest rates will have an impact on arbitrage based investments, but he maintains that those who are able to acclimatise may find the private equity space more lucrative than ever.

According to Jacobs, private equity firms need to adapt within this landscape by forgoing traditional approaches to managing investments and implementing processes which enable them to respond to changing business climates and performance.

“At Jacobs Capital, we have opted to diversify our investment approach as we can no longer rely on averages. Time is of the essence. From conducting due diligence to building relationships with the management team and then investing, we’ve streamlined the process, because in today’s market it’s critical that private equity firms respond swiftly to opportunities,” commented Jacobs.

“That being said, patience in selecting the right investments is still imperative but if your model is correct the chance of showing decent returns increases substantially,” he added.

Through his analysis of the private equity space in South Africa, Jacobs has identified that major players are shifting and beginning to build more specialised models either through focusing on specific industries or targeting improved operational performance.

He believes that the key focus must be on developing restructuring and performance enhancement business models and the way these models are implemented.

To enable them to support the need for the development and implementation of  the right models, Jacobs Capital’s specialist advisory division boasts extensive experience in guiding businesses through challenging times or restructuring businesses to deliver both profitable and sustainable outcomes.  This range of services is in high demand for both businesses requiring turnaround and those wishing to enhance business performance.  These in-house skills allow Jacobs Capital to act promptly if an asset flounders and enables the team to make a substantial change to the business structure and profitability potential.

In the past, incorporating this approach to redirecting a business in distress was unconventional for traditional private equity players, but today serious private equity partners need to, as Jacobs puts it, “get to the heart of the business and start making structural changes that enhance the business’s performance, either incrementally or via a ‘big-bang’ approach.”

Jacobs Capital further bolsters their private equity expertise through their specialist property division. This division allows for the efficient and profitable management of property assets, a frequent factor in private equity transactions, enabling the company to be highly responsive should they identify an opportunity.

Jacobs suggests that all shareholders need a clear understanding of the specific input and business modelling required for the business to yield the required returns. With a view to implementing this across their portfolio, Jacobs Capital has developed a streamlined system to identify each business’s precise needs.

“We categorise investments into a number of tiers, ranging from high performing businesses that do not require any operational input and only need guidance from a strategic point of view at a board level – to businesses that are in severe distress and require high levels of specialist input from our a team,” explains Jacobs.

Essentially, it is their ability to rapidly deploy these specialist skillsets on varying levels to achieve improved business performance which makes Jacobs Capital stand apart other investment firms.

Additionally, to achieve success within the private equity space, Jacobs believes it is imperative that businesses keep their debt under control.

“Placing management under high pressure to repay extremely high debt is counterproductive and has a number of negative effects on the business and its growth.  We tend to err on the conservative side in terms of the amount of debt we place on the balance sheet and the returns are in line with investors’ expectations,” comments Jacobs.

It is this strategy, a systematic approach to private equity and the implementation of highly effective restructuring and performance enhancement models which has enabled Jacobs Capital to develop a diverse portfolio of private equity assets.

While the Jacobs Capital mantra promotes an avant-garde approach, one aspect of traditional private equity best practice remains intact.  The standing principle is that the value is found in the buying stage of the transaction.

“Invest intelligently from the outset and ensure that all investment partners are aligned, and success will follow,” advises Jacobs.

Jacobs Capital is an on-balance sheet investor in privately-owned, unlisted businesses that have proven track records.  Jacobs Capital invests their funds, and those of their sturdy and loyal investor portfolio, into successful businesses who boast strong management teams to take such businesses to the next level. They are also highly experienced in restructuring and performance enhancement and often invest in distressed businesses which possess high potential in terms of turnaround.

Sources: Input for this article was derived from an interview conducted by Andrew Gillingham for a Special Feature on Private Equity for the Financial Mail, portions of which is quoted in a Financial Mail edition published in May 2017.

Gelvenor Parachute LinkedIn Article

Driving Innovation in Business – Gelvenor Textiles

Through the implementation of a strong remodeling strategy which drives innovation, private equity firm Jacobs Capital have ensured that their recent acquisition – South African textile manufacturer, Gelvenor Textiles – has remained competitive, relevant and clearly differentiated in an increasingly competitive and challenging international market.

The fact that a local textile mill in Hammarsdale near Durban could establish itself as a world leader in the development of industrial, technical apparel, outdoor lifestyle, protective and aeronautical fabrics has long been one of the sector’s best kept secrets.

Gelvenor Textiles has a history characterised by innovation. They developed the world’s first microfibre low bulk parachute fabrics in 2002. They also created South Africa’s first flame retardant fabric and aramid fabrics which provide ballistic protection. In 2007/8, Gelvenor supplied more than R100 million worth of ballistic fabric for vehicle armouring for coalition forces in Iraq and Afghanistan. In 2016, Gelvenor Textiles won the 2016 Fabric Innovation of the Year award from the IFAI in the USA

The list goes on.

For Wessel Jacobs, CEO of Jacobs Capital, it was more about an opportunity to take this degree of innovation and technical expertise to a whole new level. Gelvenor Textiles engineer some of the world’s most innovative textiles, and Jacobs Capital’s highly experienced business catalysts will ensure that this innovative spirit is filtered into every aspect of the business.

“The technical aspect of Gelvenor Textiles is what lends itself to developing a business focused on innovation. By taking action on this existing potential, combined with a meticulously developed business strategy, we are now seeing Gelvenor emerging as a truly formidable player in the global technical textile industry,” explains Jacobs.

“What we saw in Gelvenor Textiles was the potential to take an operationally sound business to a new level by driving innovation. While we still have some distance to go when it comes to achieving all of our goals, the results experienced so far have been nothing short of exceptional,” adds Jacobs Capital director, Quintin Terreblanche.

They both agree that changes to the already successful business model would not have been remotely possible without having a solid team in place at Gelvenor Textiles from the onset.

“Gelvenor Textiles view innovation as threefold – evolutionary, devolutionary and revolutionary. Primarily, they focus on the evolution of the Gelvenor Textiles product range through constantly adjusting and adapting current fabric technologies to develop new applications. When it comes to devolution, they look to opening new market applications through the use of existing textile technology. They also pursue a revolutionary course of innovation which aims to disrupt and challenge existing technical and production competence with pioneering textile solutions,” explains Jacobs.

This ability to innovate is evident in Gelvenor Textiles’ groundbreaking products. These developments include parachute fabric that is lighter than ever before and allows for a 15% to 20% reduction in pack volume without compromising on strength. Gelvenor Textiles also developed a patented conveyor belt carcass fabric for the mining sector – used for extremely long conveyor belts, this advancement helps mines radically reduce energy consumption and lower manufacturing expenses. In addition, these belts offer better adhesion, improved strength and a longer lifespan to further decrease costs.

Another innovative product development is the microfiltration fabric component manufactured specifically for use in the VA-RWF, a non-electrical water filter which has already brought clean drinking water to hundreds of households in rural South Africa. This pioneering fabric saw Gelvenor Textiles achieve international recognition when they won the IFAI Fabric Innovation of the Year award in 2016.

Jacobs believes that the grit that has seen Gelvenor Textiles survive the implosion of the South African textile industry during the nineties, and the technology that has made them a trailblazer in the global market, could lead the way for more South African textile companies.

Already, Gelvenor Textiles is playing a role via its involvement in the South African Technical Textile Cluster (SATTC), a Department of Trade and Industry initiative aimed at helping local producers benefit from an integrated value chain which coordinates their efforts to bring new, improved technical textile products to the market. Ultimately, the results speak for themselves with SATTC reporting a 115% growth in exports during 2016 when compared to 2012.

The reality is that South African textile operations cannot compete with the Chinese mills that dominate the “commodity” side of the world’s textile market. But, as innovators who have committed to relinquish the manufacturing of commodity fabrics and invest in delivering technically superior quality products, they can lead rather than follow.

As for Gelvenor, this strategical decision taken to focus on these superior quality fabrics is certainly paying off. Today the company exports to 27 countries worldwide, including China.

For more information please visit www.jacobscapital.co.za and www.gelvenor.com

To find out more about Gelvenor Textiles winning the 2016 Fabric Innovation of the Year award from the IFAI in the USA – visit http://gelvenor.com/gelvenor-scoops-international-iff-innovation-award-2/

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Masonite Africa is reborn as Evowood

(L-R) Hilton Loring (commercial director of Evowood), Quintin Terreblanche (director, Jacobs Capital), Nkosinathi Nhlangulela (director, Black Bird Capital) & Louis Marais (Evowood CEO).

Masonite Africa Limited, the South African market leader in hardboard and softboard for over 70 years, will be rebranded as Evowood from November.

The rebranding marks a new beginning and reflects the rejuvenation and reinvigoration of a company that was acquired by the proudly South African consortium of Jacobs Capital and Black Bird Capital in August 2016.

A condition of the sale agreement stipulates that the newly constituted company can only trade under the global Masonite™ brand until the end of January 2017.

“We understand how well known the Masonite™ brand is, and we will be co-branding our products for a short period. We want to ensure that our key partners – wholesalers, retailers and manufacturers – realise that they are not only buying the same quality products but supporting a brand that promises far more in the future,” says commercial director, Hilton Loring.

He believes that the rebranding goes beyond a simple name change. “The shackles are off and this company is evolving from being one that has been starved of investment by its global parent to one that has been freed up to reach its full potential through its new shareholders’ R300 million investment in  processes, products and improved service.”

Loring says that, in much the same way as ‘hoover’ has become the generic term for a vacuum cleaner, he believes that ‘Masonite’ has largely become the standard term for hardboard.

“It’s our vision that, as Evowood, we will take this company from what is mostly a hardboard manufacturer to a fully-fledged timber company participating in a broad range of categories. We believe that we have both the capacity and the capability to expand this company.”

In order to set the platform for this vision, Evowood has also created a number of sub-brands under the company logo:

Evosure: High quality hardboard and speciality hardboard products

Evosoft: High quality softboard and fibre products

Evodoor: High quality hardboard door skins and imported speciality skins.

Loring says that, up until now, the company has operated in just 10 percent of the market. It can now look to participating in a far broader spectrum of the timber market. It can now leverage additional local opportunities as a 51 percent black owned company and explore additional export markets as capacity is built back into the business.

Newly appointed chief executive officer, Louis Marais, concludes: “We’ve carefully thought about the image that we wanted to create for this business going forward. With key investment by our shareholders, we are now able to explore latent ideas and opportunities that will see us evolve into a truly South African company with a sustainable future.”

For more information, visit www.evowood.co.za

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Jacobs Capital & Vulindlela Holdings Invest in Summit Crane Hire

(L-R) Clint Correia (Summit financial director), Nomfobe Ndzelani (Summit HR manager), Leonard Openshaw (Summit operations director), Michael Grant (Summit CEO) & Tyrone Bricknell (Jacobs Capital investment manager)

Private equity investors, Jacobs Capital and Vulindlela Holdings, have purchased a majority stake in leading mobile crane hire company, Summit, for an undisclosed sum.

The company, which is the market leader in the Western Cape and has a presence in the Eastern and Northern Cape, has substantial growth prospects nationally.

The inclusion of new private equity partners will enable it to realise a number of major growth opportunities in key areas such as the oil and gas sector and wind turbine electricity generation industry, explained Jacobs Capital chief executive, Wessel Jacobs.

Summit provides mobile cranes, trained operators and related vehicles and rigging services to clients as part of short to medium term contracts or one off projects. It is the dominant mobile crane provider in the Western Cape and is currently servicing clients in many different industries.

In terms of this transaction, the Vulindlela / Jacobs Capital consortium will hold a majority stake in the business with chief executive and company founder, Mike Grant, chief financial officer, Clint Correia, and chief operations officer, Leonard Opensaw, each owning a share in the company.

CEO Mike Grant, who launched the company to provide a one stop lifting and moving solution in mid-2010, said that he realised that there was a need to take on private equity partners to maintain Summit’s steep growth curve earlier this year and to involve partners with the right BEE credentials.

During its first four years in operation, Summit has had double digit growth in turnover year on year and with the new partners expects to carry on this growth. Last year, Summit Crane Hire invested over R50 million in growing its fleet, adding forklifts, trucks and mobile cranes. It has a staff of 100, including highly skilled rigging crews, project managers and health and safety officers.

Grant, who has turned down at least 10 offers to purchase the company, said that because the company was operating at full capacity and needed even more additional equipment, it had been forced to pass up a number of lucrative contracts.

He said Jacobs Capital and Vulindlela would add value to the existing dynamic team. With an improved BEE scorecard and financial backing, the company is now well positioned to work on large infrastructure projects in both the public and private sectors.

Jacobs Capital’s investment manager, Tyrone Bricknell, said that the investment in Summit Crane Hire was an exicting one. The business had a strong track record and the investment was supported by a strong and experienced management team that now included shareholder partners.

“The management shareholders are highly experienced and we see this as an opportunity to partner with them for the long term. We would like to use our investment in Summit Crane Hire as the foundation for further growth in this sector. We would like to grow the company either through acquisition of similar businesses or organically and we believe that it will be the market leader not just in the Cape but throughout the country in the near future,” he said.

The balance sheet has significant assets which are underpinned by strong earnings with sound growth projections for 2017 and beyond which was another important investment criteria.

Summit Crane Hire currently focuses on the oil and gas, mineral and logistical support, civil infrastructure, industrial and construction sectors. This diversity is a strength, because if there is a downturn in one sector, assets can be reassigned to others.

Jacobs said that the Summit Crane Hire investment was a valuable addition to the Jacobs Capital portfolio. With investments set to reach R2 billion shortly, it has been on an aggressive acquisition trail over the past year.

Summit Crane Hire marks the fourth major investment for Jacobs Capital over the past two years.

For more information about the companies:

www.summitcrane.co.za

www.jacobscapital.co.za

www.vulindlelaholdings.co.za

 

 

Masonite - Siyabonga Mncube, Wessel Jacobs, Nkosinathi Nhlangulela & Hilton Loring

Jacobs Capital investment breathes new life into Masonite and restores confidence

Siyabonga Mncube (Black Bird Capital), Wessel Jacobs (Jacobs Capital), Nkosinathi Nhlangulela (Black Bird Capital) & Hilton Loring (Masonite).

A recapitalization programme and an investment of over R300 million are on the cards for KZN-based Masonite, a major South African manufacturer of high quality engineered wood.

The business rescue process – which started last year and officially ended this week – included the acquisition of the company by corporate investment and transactional advisory firm Jacobs Capital and its partners, Black Bird Capital (headed by Nkosinathi Nhlangulela and Siyabonga Mncube).

Creditors received 100 cents in the rand and shareholders will be paid a 35 percent premium on the list price. Most importantly, all employment contracts were saved.

The board of directors is in the process of being reconstituted.

“We have wasted no time since the deal was approved by the Competition Commission in June. All the conditions of sale have been met. This is a very exciting time. We have teams in place looking at all aspects of the business and strategic planning sessions have produced short and longer term plans,” said Wessel Jacobs, chief executive of Jacobs Capital.

The addition of the Masonite business at Estcourt, KwaZulu-Natal, to the Jacobs Capital portfolio marks the third large investment by the group in 12 months, and it is expected to make a meaningful contribution to the annual revenue of the company, whose investments already exceeds R1,5 billion.

Since its establishment in 2002, Jacobs Capital has completed over 50 restructuring projects including the successful turnaround of Da Gama, one of the largest textile mills in South Africa.

Jacobs said Masonite is a strong company and the deal was structured to ensure that all creditors were paid out leaving the company with a debt free balance sheet and working capital of R85 million as well as R100 million in stock holding.

“Extensive recapitalisation of the production lines is necessary to ensure that the Mill runs at full capacity which will ensure that the company is able to return to sustainable profit as quickly as possible.  A new product line is also among plans to ensure that Masonite keeps up with market trends,” said Jacobs.

“We believe that the modernisation of the mill will prepare it for expansion into new markets and products. This will contribute towards Masonite business maintaining its position as a leading producer of hardboard and timber products,” he added.

Nkosinathi Nhlangulela, director and shareholder added: “The company is now 100 percent locally owned with a new board that understands local conditions and imperatives. We see this as a long term commitment to both the business and the KwaZulu-Natal region. The new Millco leadership team is well placed to ensure a sustainable, ‘built to last’ business approach. It combines local management experience and expertise and offers access to strategies, systems and methodologies that have proven successful in turning around a number of South African manufacturing businesses.”

An upbeat Hilton Loring, Masonite Chief Executive, said the company was back on track. “The lead management team is in place with renewed energy and entrepreneurial spirit. This combined with investment and a new product line will ensure the company meets growing demand and provides Masonite products of the same high quality and standards that customers expect.

Jacobs said he was confident that the oldest company listed on the Johannesburg Stock Exchange was poised to regain its place in the economy. “We have an excellent team that can restore this business and take it to new heights.”

In terms of the ratified transaction, the Millco Consortium has purchased the Masonite Mill. The Masonite forestry assets have been sold to Forestco which is owned by R&B Timbers and an agreement is in place that secures the supply of timber for Masonite.

The Estcourt Mill, in the KwaZulu-Natal Midlands, which produces hardboard, soft board and door panels, was damaged in an explosion in June 2014. This, together with a difficult trading environment, saw the company apply for business rescue in December last year.

Because Masonite has been in business rescue, its trading on the JSE has been suspended. Details of the listing on the Johannesburg Stock Exchange are still to be finalised.

Jacobs Capital was established in 2002 as a private investment company. Since then, it has developed from exclusively acquiring and establishing businesses, to incorporating independent divisions that provide an extensive range of business advisory services as well as manage turnarounds, mergers and acquisitions.

Its portfolio includes leading workwear manufacturer MB Workwear, textile companies Da Gama and Gelvenor, automotive component supplier Connecto Fasteners.

Unlike other potential private equity investors, Jacobs Capital is able to draw on extensive in-house expertise to implement a strategy that will see Masonite taken out of business rescue within a short period of time.

Visit www.jacobscapital.co.za for more information about the company.

 

Leon Raubenheimer & Wessel Jacobs

Jacobs Capital buys South Africa’s leading industrial workwear manufacturer

Leon Raubenheimer (Former Managing Director of MB Workwear, currently Jacobs Capital Director) & Wessel Jacobs (Jacobs Capital CEO)

Durban based private investment company Jacobs Capital has just purchased the majority interest in Port Shepstone based MB Workwear, the market leader in industrial safety workwear in South Africa thereby localising the stake previously held by its Australian based shareholders.

Wessel Jacobs, chief executive of Jacobs Capital, said that the deal, which will soon become fully implemented once all approvals are in place, provided an important opportunity to invest in a company that had not only survived the drastic decline of South Africa’s clothing and textile sector since the nineties but had also grown its market share both locally and abroad.

Over the past three years, sales have grown by an average of 11 percent and MB Workwear is on a strong drive to not only increase sales and market share locally but also to establish and grow key niche markets in Africa, Europe and the Middle East.

“We see a lot of future value coming from the increased profile of safety across all segments of industry driven by legislation, the effects of the Local Procurement Act and the drive towards innovation within the company itself. As a South African shareholder that understands the local business climate, we believe that we can both create and cement strong and lasting relationships with our customers,” he said.

Both locally and abroad, the workwear market is an extremely competitive one that is often flooded with large quantities of low quality cheap garments due to the low barriers to entry. MB Workwear’s strength is its ability to service highly specialised niche markets in heavy industry.

“The MB Workwear team has successfully run a profitable business under difficult market conditions, showing that they have the trade knowledge and business acumen required to continue to see the business trade profitably into the future,” said Jacobs.

The company, which traces its history back over 50 years, was located at Marburg on the KZN South Coast to take advantage of incentive packages offered by the then Department of Trade and Industry to decentralised businesses.

MB Workwear, as it is known today, was formed in 2005 through the merger of Marburg Manufacturers which had been established in the 1960s and Beslin Workwear, which was set up during the 1980s. Today, it employs more than 950 people and utilises over 350 000m of fabric to produce in excess of 200 000 garments per month for customers across a wide spectrum of industries including mining, foundry, steel, oil, gas and petroleum and chemicals.

Director, Leon Raubenheimer, explained that MB Workwear specialises in protective work wear and is known for excellence and innovation, particularly when developing specialised fabrics and fabric treatments for garments. These include its exclusive ZeroFlame® range of fabrics developed specifically for protection against fire and molten metal drip or splash. The company is also internationally accredited to manufacture protective garments from Vinex fabric developed specifically for the aluminium industry and DuPont’sTM Nomex® fabrics that offer inherently flame retardant properties.

He said the company was constantly working with suppliers and other partners on innovation relating to both the garment manufacturing process and the fabrics used. An example of a current project is a joint venture with Gelvenor Textiles to manufacture coveralls produced from a specialised fire retardant fabric for both local and international markets such as the Middle East.

“MB Workwear is able to produce protective clothing that is rated amongst the best not just in South Africa but across the globe. Our commitment to quality has helped us to form longstanding relationships in the gold, platinum, coal and diamond mining industries as well as with parastatals such as Eskom and leaders in OGP such as Sasol, Engen, Chevron, Shell, BP, Total and Mossgas” he said.

Other big names on the MB Workwear customer list include Illovo, Huletts, Engen, BHP Aluminium, Sapref, Columbus, Sappi and Scania. It also supplies products directly or via distributors into major retailers such as PEP, Pick ‘n Pay and Checkers.

MB Workwear offers brands that are SABS approved. The company boasts ISO 9001 certification and also holds accreditations in Canada and the European Union. As a result, growth in export sales revenues has averaged 10 percent over the past three years. Almost 10 percent of turnover comes from sales to Africa and Europe, nearly three times more than the industry average of 3,82 percent.

MB Workwear has been exporting for over 13 years. Established markets include Namibia, the UK, Norway, Zambia, Ghana, Mozambique, Angola and the United Arab Emirates.

Investment in automation and new plant has created capacity for growth. Raubenheimer expects to make inroads into the local market due to increasingly stringent safety regulations stipulated in the Occupational Health and Safety Act and the requirements for internationally recognised ISO certification.

When it comes to exports, he believes that the company’s quality, innovation and ability to specialise in specific sectors and niche markets will put it on a strong growth curve. The weakening of the rand is also likely to make MB Workwear a competitive player internationally.

Overall, he says the company’s good future prospects and renewed energy come on the back of a change in ownership and the implementation of strategic improvement projects to enhance the overall performance of the company both offshore and closer to home.

For more information about Jacobs Capital, visit www.jacobscapital.co.za and to find out more about MB Workwear, log onto www.mbworkwear.co.za.

 

Gelvenor Chief Executive, Dicky Coetzee, Jacobs Capital director Leon Raubenheimer & Jacobs Capital CEO Wessel Jacobs (med res)

Gelvenor Textiles sold to South African investor

Gelvenor Chief Executive, Dicky Coetzee, with Leon Raubenheimer (Jacobs Capital director) & Wessel Jacobs (Jacobs Capital CEO)

South African private equity firm, Jacobs Capital, has acquired Gelvenor Textiles, manufacturer of industrial, technical apparel, outdoor lifestyle, protective and aeronautical fabrics from Courthiel Holdings, which is owned by German corporate investor, Claas Daun, for an undisclosed amount.

The transaction, which is effective from January this year, includes a merger with South Coast based MB Workwear, one of South Africa’s leading manufacturers of workwear and personal protective clothing.  MB Workwear will become a division of Gelvenor Consolidated Fabrics.

“This means that Gelvenor is now a 100 percent South African company for the first time in our long and successful history,” said Gelvenor Chief Executive, Dicky Coetzee.

Gelvenor was established in 1965 as a weaver, dyer and finisher of synthetic and manmade continuous filament yarn fabrics. The Hammarsdale operation has grown into one of the biggest success stories in the South African textile sector and is regarded as a global leader in the production of aeronautical fabrics, ballistics textiles, fire resistant fabrics and many other specialised products.

Gelvenor’s range of aeronautical textiles is the result of 30 years of research. It has been used worldwide for over 25 years in the production of paragliding, skydiving, hot air ballooning and military canopies. Gelvenor developed the first microfiber low bulk parachute fabrics in the world in 2002. These are now standard products sold to leading parachute manufacturers and have not been copied.
In 2007/8, Gelvenor supplied more than R100 million worth of ballistic fabric for vehicle armouring for coalition forces in Iraq and Afghanistan.

Wessel Jacobs, chief executive of Jacobs Capital, explained that, even though the two companies operated under the same parent company, they would continue to operate separately in the market as independent entities.

Coetzee said this was important as Gelvenor had concluded important supply agreements with key customers within the workwear market and needed to ensure that there would be no conflict of interests.

Jacobs added that the new ownership would not result in any material changes in agreements with Gelvenor’s suppliers. Most importantly, the company’s sustained growth meant there was no need for any staff changes. Instead, the emphasis would be on further innovation and research as part of a drive to position Gelvenor as a global leader in the production of specialist fabrics.  In the longer term, this could see the company expand and create further job opportunities.
Gelvenor has capacity to produce 18 million square metres of fabric per year. 25 percent of Gelvenor’s output is contract fabrics, 30 percent is industrial fabrics, 25 percent is specialty high tech fabrics, 15 percent is apparel fabrics and the remaining five percent, commodity fabrics.

Gelvenor exports at least 30 percent of output directly. 30 percent of its local sales go towards indirect exports in the form of ballistics products, bomb suits, parachutes and uniforms. Key export markets are Russia, America, Europe and the United Kingdom.
“Gelvenor celebrated 50 years in business during 2015. The philosophy that drove us for the first 50 years was to step out into the unknown, tackle those niche and speciality markets and go where others were too scared to tread. Now we have new ownership that will bring additional vitality and new energy to the business. This is very exciting for us,” Coetzee said.

He added that the sale was very positive for Gelvenor as Jacobs Capital supported its sustainable business model and its strategy of continuing to place Gelvenor at the forefront of speciality and technical textiles.
He said that plans were in place to grow production of aeronautical textiles by at least 30 percent in the next year through the production of extremely light and thin fabrics for rescue parachutes as well as capturing additional market share in the paragliding market.
“Jacobs Capital has a team of strong business leaders who will invest in and assist us to build on Gelvenor’s strengths. Their target is to grow the business and to provide support for Gelvenor to tackle even bigger projects than what we have done in the past,” he concluded.
For more information, visit www.jacobscapital.co.za and www.gelvenor.com

 

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