A key tool in dealmaking: the earn-out

An earn-out structure is a corporate finance tool that is critical when negotiating deals. Put simply, an earn-out adjusts the purchase price for a company based on the achievement of future financial milestones. Technically, there can be non-financial milestones as well. I haven’t advised on such a deal myself, but I can easily imagine a situation in a venture capital …

View Post

International firms circling South African companies

The Companies Act requires public companies to make an announcement whenever a shareholder crosses through a 5% milestone. In other words, if a shareholder held 4,8% and bought more shares today, thereby increasing to a shareholding in the company of 5,4%, the company would need to announce on SENS that this has happened. This is important because it alerts the …

View Post

Deal-It-Yourself: Cashbuild takes a risky punt

In challenging times, companies often decide to stick to their knitting. They dispose of non-core businesses, especially when those businesses are underperforming and are dragging on shareholder returns. The cash is often used to pay down debt, de-risk the group and allow for complete focus on what the group is actually good at. This exact playbook has been used by …

View Post

Joffe proves there’s Long4Life after Bidvest

Within the South African business community, there are giants who seem to get it right time and time again. In contrast, there are others whose fall from grace has been quite spectacular, like Markus Jooste over alleged accounting fraud in Steinhoff and Christo Wiese over a number of poor investments. Let’s focus on one of the giants with a much …

View Post