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Interview with Cobus Visagie and Milko Skoro of Africa Merchant Capital Advisory Limited

Jeff Schmidt CEO CDI Global:
I have the pleasure today of introducing to the CDI Global partners, our clients and prospects. The newest member of the CDI Global Worldwide Network Africa Merchant Capital, with offices in London and South Africa will be our exclusive representative in Sub-Saharan Africa. We have the founders with us today, Cobus Visagie, Group Chief Executive Officer and Milko Skoro, Managing Director. Welcome gentlemen to this to this interview. We're thrilled to have you both and your firm as a part of our network, and we would like to use this interview as an opportunity to give you a broad exposure to our constituency. So maybe we could begin with a brief summary of your backgrounds. How did you meet and, and what led you to form African Merchant Capital?

Cobus Visagie, Africa Merchant Capital:
Well, good afternoon from London. Jeff, thank you very much for the introduction. I will start off I currently fulfill the role as group Chief Executive of Africa Merchant Capital. Our engagement here is with the advisory subsidiary Africa Merchant Capital Advisory, which Milko is the managing director and also shareholder in that business. Our background of Africa Merchant Capital is a advisory business.

Milko Skoro, Africa Merchant Capital:
Thank you Cobus. And Jeff, thank you for welcoming us into the CDI Group. I was on the buy side and most of my history is actually on the buy side, I spent about 14 years in fund management or investment banking. And in late 2017 started, having seen that the market in Africa wasn’t well serviced from a, a position of high quality, high due diligence and in-depth representation of companies that are essentially very good. But on paper with owner operators or even the larger firms doing it themselves, there was a big opportunity for us to, to create an investment bank that gives these people the correct representation across European.

Jeff:
When we look at Africa from the perspective of developing developed countries sub-Saharan Africa includes a lot of emerging markets. How, how do you view the market for acquisitions and divestiture advisory services as well as capital raising in sub-Saharan Africa? Are there significant differences by country? How do you focus your efforts on the market in a way that reflects the growth and development of these economies and, and the opportunities that are available, especially for companies in Europe and, and Asia and North America to make acquisitions or otherwise invest in Africa?

Milco:
To answer that, you know, in the poll of news, only bad news seems to hit the press. So not often do you see all the good news happening. There's a lot of M and A activity. Often, it's very regionalized and the transaction sizes can be very small that in a fair amount of cases, they are certainly well considered mid-market transaction sizes Africa is well endowed with natural resources. It's got a great middle class growing population, which speaks to your services, your food and agricultural sectors, chemical sectors, there's a lot going on for it. I think if you know independently you put Africa on a analysis and don't mention that it's Africa, you would assume it's a high growth investible region But what we had to let CDI Group know and let the world know is that's, there's a lot of well governed, well run businesses that are growing and are looking for investment partners and are looking to expand beyond the African borders, which creates opportunity for investors to come in and expand with them. Most of our clients are European UK domicile with operations in Africa.

Milko:
I would just comment, Jeff, on your question around intermediation in the market and how it difference from country to countries. So firstly, I would just say that as a business, our focus is on Anglophone sub-Saharan African countries by saying that we, we cover all the major economies of Sasha Africa, probably with exclusion of Angola. And, you know, it's a Portuguese speaking country. But saying that we are focusing on a country doesn't mean that we are excluded, but our focus is on anglophone, Sasha Africa countries.

Cobus:
You see certain markets like Kenya, Kenya really serves the whole of the East African markets. That is where you will find more than a hundred private equity funds, many intermediaries operating in that market. And it's also Nairobi's a favorite destination for development finance institutions to have their offices. The same with Johannesburg in South Africa. And then you've got these  other countries like Rwanda, it's quite favored. It's got a very strong US influence.

London is really the capital city for your mid-market to larger transactions in Africa, in South Africa. I mean, I would say also that it's important to understand that Africa's got basically sub-Saharan Africa's got five distinct regions in West Africa, East Africa, Southern Africa. You've also got the central Africa region which is really underserved. I would say. And then also consider that West Africa can effectively also be divided between anglophone and Francophone Samsara Africa. So, you'll see a lot of transactions in Francophone, Samsara Africa, not making it to London or Johannesburg or Nairobi, or even to Lagos. It will probably be banked out of Paris. And that has been the traditional, you can say, colonial influence that France will have over their colonies. So again, in those you will have a lot of French intermediary sitting in Paris operating in Francophone Samsara Africa. And the one interesting further point to it is that you probably have a bit of influence out of Morocco with French speaking investment bankers sitting in Morocco, Casablanca operating in the West African Francophone market.

Jeff:
You mentioned earlier agriculture and chemicals is two of the industries that have significant opportunities in Africa. If you are a company in North America looking at Africa as a place to invest for growth and diversification and that would entail perhaps buying a company to get a bridge head in the market. What are the things that are distinctive about doing deals in Africa that you know, a first-time investor needs to be aware of? How do they go about identifying business combinations and, and closing those deals in a way that is going to be successful as opposed to run into you know, all kinds of cultural or other issues that ultimately will scuttle the deal?

Cobus:
I think it's very important to understand the background to what I've just shared about the regional aspects of Africa. So you can approach Southern Africa out of South Africa, so it is very easy to, or it's the methodology of accessing Namibia, Botswana Mozambique Zambia, I just want to say Mozambique is a Portuguese speaking country, but it's very well you know, it's right next to South Africa and it's almost like the 12th province of South Africa, so that's also called the Sadek region. The same will be for East Africa and out of East Africa. The most logical way to approach it will be out of a Kenyan based parent company that will have a way into the likes of Uganda, Tanzania, Rwanda within that market.

And then in West Africa, it's slightly more complicated. They are not such a great corporation there. But a typical approach would be either to be, to approach it out of Ghana or of Nigeria, but to give you an idea to breach from Ghana to Nigeria or the other way around is probably as difficult as doing it out of, out of the us. So we are in the process, for instance, we've got an active retained buy site mandate, and it is definitely the way to go about it is to do a through one of the champions in industry. They are in South Africa, for instance a number of listed as well as large private owned agricultural companies that have got strong and significant private equity investment in them that have successfully done this expansion in multi count, multi-country rollout, for example, within the fertilizer business, the seed business chemicals et cetera. You've got any further thoughts to that as well?

Milko:
Make any first step in and you’ve pointed out, there are cultural differences across each region. The continents made up of 50 plus countries of which fourty odd we are servicing. And you know, being cognizant of the cultural aspects of the transaction country nuances, and going down to, the history of extraction that goes across multiple sectors. So when we are looking at any transaction, whether it's buyer or seller, we do a comprehensive market mapping, a macro mapping, and look at all the risks going in. And each phase of the transaction is broken up so that we make sure that all risks that are possibly mitigated can be mitigated.

Jeff:
Are there distinctive or significant areas for diligence once you go into confirmatory due diligence? In China, when Western companies first started to invest, there was a lot of concern about records on employment legal, you know, contractual issues, quality of burnings issues and so forth. So we did a lot of commercial due diligence for buyers from Europe and North America to make sure that they knew what they were buying, that all of the financial accounts and so forth could be relied upon or that you know, adjustments could be made in the negotiation process before closing. Is that a similar kind of issue for deals in Sub-Saharan Africa? What advice do you have for prospective investors about due diligence and what transaction support can we provide to them?

Milko:
Yes, whether we are doing a bar side or a sell side transaction, we conducted a due diligence at commencement. Because if, if we are doing a sell side transaction, we want to confirm that the information we are presenting to the market. .

Jeff:
Okay. We haven't talked much about capital raising. What is the focus for capital raising which I understand is done out of London for companies in the market? Are you raising growth capital? Are you raising capital to help finance major greenfield investments for funding transactions? What is the scope of, of the services that you're providing and who is your target market for capital raise?

Milko:
So, our clients, in terms of capital raising we do look at projects from power telco and mining projects. Those are the three main sets. Generally, if it's a telco project, there's a large tech element interest, you may not know this, but there's three major tech hubs on the continent. One is in South Africa, probably the biggest, then Kenya and Nigeria. So that's on the childcare side. On the mining side and agricultural side mining, you know, you follow the resource and I think Africa's well covered by the majors for resource investments. And there's still a lot of scope for more investments.

Jeff:
You know, Bo Hjelt, as the founder of CDI Global likes to talk about the perfect strategic fit. In fact, our logo is stylized puzzle parts fit together perfectly. And I would just conclude this interview by saying that from your observations and certainly speaking on behalf of all of the partner firms in CDI Global, African Merchant Capital is a perfect strategic fit for us and hopefully for you as well. And we look forward to enjoying great successes with you in the coming years. So, thank you today Cobus and Milko for your time. And we encourage all of our partners, our clients, others interested in, in Africa to contact you.

Thank you.

 

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