M-Fitec seeking R360m for special purpose acquisitions

20 September 2015 - 02:00 By Giulietta Talevi

The firm’s chief investment officer, Greg Voigt, tells how a new kid on the JSE block plans to raise capital for bold ventures in financial technology. You have quoted a Barclays executive who described the fin-tech sector as "white-hot". Why so?We see a huge deal opportunity for what we're trying to achieve, with companies that are involved in financial technology, software services, platforms and payments; to existing and emerging financial services players. Our pipeline suggests many companies would be potential acquisitions for Spacs (special purpose acquisition companies).How big is your pipeline? You're looking to raise R360-million from investors ...We have 26 transactions that are potential deal opportunities. Some of them are $20-million Ebitda businesses and some of them are $2-million Ebitda businesses.story_article_left1Are you not competing with the likes of EOH, which - as a much more established business - probably has a better chance of making these deals?Well, this is more the EOH of 10 years ago, where you're getting in on the ground floor and hoping to build something through successful execution of acquisitions and organic growth. What makes this different is that you're starting out as a clean cash shell with the obligation to make acquisitions according to certain criteria. I think the focus of the segment and the sub-Saharan African play make it a slightly more narrow ICT-type enterprise.Have they always been successful? Surely building up a company is more than making lots of acquisitions?There's investment allocation and there's integration. If one looks at an investment-holding company, you can have a number of companies in which you are an investor and where you may have control or a path to control, and over time you can integrate those. What we're trying to achieve is to give businesses that are within the R20-million to R200-million value bracket a next chapter in their own growth and development by providing some financial support, but always retaining the entrepreneur.We wouldn't see ourselves as a vehicle where someone would be able to exit and achieve an earn-out and go fishing.You draw a lot of attention to the board you've pulled together - CEO Charles Rowlinson (from formerly listed firm Educor) and Richard Came (co-founder at Didata), and people from Vantage Capital. How did you come together?We need a credible, experienced board with a multitude of skills : people who are operationally equipped, strategically smart, can execute transactions and have run a public company .You are targeting institutional and retail investors (R5-million minimum subscription for the former, R500000 for the latter). Can you describe the response?People are interested in the vehicle - it's not well understood; the South African consideration of a Spac is unique in the world, so we are a little bit pioneering in that respect.Are you confident of raising the R360-million you want?As I stand here today, we're hopeful we'll raise the money.story_article_right2What are the pros and cons of being a Spac - especially in South Africa with slightly different legislation?An investor gets full disclosure of costs and the acquisition strategy, plus full transparency on the board and its commitment - which has to be a minimum of 5% in real money in their own personal name.The benefit is in the event of systemic risk, if the market collapses or you are unable to conclude an acquisition of assets, you can get your money back after two years with the net costs. So you have this built-in, downside protection. Most importantly, investors get to vote on the acquisitions in general meetings.Are all shareholders created equal?Yes. The JSE has limited any preference shares or other separate instrument. The only difference in our structure is the directors have been locked in, provided a right of first refusal on transaction activity, and are available on call. For that there's a minimal share compensation in the form of an additional deferred share that is issued with their purchased share.The directors are putting in the minimum - 5% or R18-million. Is that enough?There's nothing stopping directors putting in more money. The 5% was a strategic decision that we didn't have one director who put up all the money.If everything goes to plan, when do you aim to list?We are hoping for the end of October with a successful private placement.Talevi is a BDTV anchor..

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