The past 2 years have been extraordinary in respect of economic, social and political uncertainty and volatility – both internationally and in South Africa. The Covid-19 pandemic and now the major geopolitical crisis caused by the invasion of Ukraine have resulted in massive disruptions in business supply and procurement chains. These issues are further compounded in South Africa by constant disruptions in electricity supply, inefficient ports, last year’s violent unrest, stagnant economic growth and record levels of unemployment.

Faced with such enormous challenges, a lesser nation would be on its knees – but South Africa is blessed with resilient and dedicated entrepreneurs, who have learnt to be agile in this extremely challenging economic landscape. South African entrepreneurs always find a way and 'make a plan', which is something we can all be proud of. 

But with soaring input costs and a muted economy, even our formidable business owners are having a hard time growing their businesses and are looking for ways to diversify and find alternatives to maintaining growth. Companies today need to pursue new paths continually to diversify, as being too reliant on a particular customer or country is a huge risk, as evidenced by the invasion of Ukraine: the sanctions imposed on Russia will worsen the disruption in supply chains and we have already seen how they have impacted on the availability and cost of global energy.

Several paths to growth

Corporate action can play a key role in this drive to diversify and grow. Mergers and acquisitions, for example, have become a successful business strategy for companies looking to gain new territories, grow revenue lines, diversify their customer base, increase their operating margins or acquire new technologies and skill sets. Management buyouts are also effective. In fact, research undertaken by the Business Development Bank of Canada indicates that the success rate of a management buyout is significantly higher than that of a third-party acquisition. This is because the existing internal leaders tend to have a deeper understanding of the business and how to run it, so the transition is smoother and faster, with less learning time and a lesser impact on employees, customers and suppliers.

Similarly, management buy-ins - the acquisition of a business by a management team from outside the company - can be a win-win situation for buyers and sellers. A management buy-in team is usually highly experienced with extensive knowledge of the sector, which they can use to revitalise the company. New management may bring new contacts and business opportunities and current employees may also be motivated by a change of management, particularly if a company is performing poorly. 

Companies seeking to accelerate transformation should consider approaching broad-based black economic empowerment (BBBEE) consortiums to acquire an equity stake. Advantages of going this route include being favourably considered for procurements by the public sector and all BEE-verified enterprises, having access to tax incentives and financial grants specifically aimed at the BEE programme, and the ability to negotiate better payment terms. 

Choosing the right financial partner

The Nedbank Principal Client Portfolio Team has the skills and experience to advise on and facilitate all these larger, growth-enhancing transactions, and more. With Nedbank Commercial Banking, you get a partner that is strategically aligned with your growth narrative – one that understands that you need more than just products. We provide the professionals who see the bigger picture and help your business reach the next level. With the help of our highly skilled team of experts, you’ll receive customised banking solutions to support your business.

Having the finance and our expertise at their fingertips has enabled our clients to remove obstacles and close transactions in a seamless, hassle-free way - whether they were delisting, raising acquisition capital, seeking expansionary finance or long-term debt-structured funding, or funding for shareholder exit strategies. Our approach is to provide you with a dedicated coverage banker and service specialist as your one-stop point of contact. This team works closely with credit, specialised finance, and domestic or cross border transactional and industry specialists so you have a well-coordinated and skilled team focused on the growth aspirations of your business.

To find out more about how we can partner with you to grow your business, go to our Commercial Banking website.

This information is intended for general information purposes only and does not constitute legal advice.