Lesson 1 Management

1
Lesson 1 - Management

• Strong correlation with performance
• Need to harness energy
• Test - track record
• - CVs reference checks
• - instinct!
• Non-Executive Directors

2
Lesson 2 - Structuring

• Devaluation is biggest killer of returns
• Unsophisticated financial markets to hedge
• Natural hedges are available
• Structuring to get cash out quickly

3
Structuring - Example

• Motor Spares distributor - MBO completed in 2000
• Management invested - Z1.02m for 51
• Takura Invested - Z0.98m for 49
• - Z6.0m shareholder loan
• - Z6.0m additional loan facility
• 3rd Party debt - Z55m
• Management dividend linked to loan redemption
• Result was Z6m cancelled in yr 1 and repaid in
  yr 2

4
Structuring - Example continued...

• Charhons - private placement
• Takura Invested
• - US94,000 for 25
• - US670,000 shareholder loan
• Currency devalued by 4,500
• Exited in December 2002
• Cash returns of US1.2m
• Equity sold for US650,000
• IRR in US terms of 36

5
Lesson 3 - Value Addition

• Cant just invest and sit back
• 2 rule
• Example - Construction services business
• - MBO in 1997
• - Encouraged regional expansion
• - MD did not perform
• - Loss making in first part of 2000
• - Removed MD
• - Now established in Zambia Botswana

6
Summary of Lessons

• Lessons are applicable for any environment
• Management - dont compromise!
• Structuring - ungeared deals need growth
• Value Addition - 2 rule
• Regional funds - to avoid beating the odds in
  a crisis, need local physical presence.

7
The Takura Experience
The environment - Currency devalued by
12,000 - Unemployment risen to over 70 -
GDP declined for 4 years - Voted worst
investment destination Takuras achievement -
Backed 15 companies - Taxes paid of US9.5m to
end 2001 - Employees totaling 6,415 -
Portfolio US IRR of 34