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The Impact of Private Equity

in Emerging Markets

Case Study: Southey
Southey’s Dormac seen from above The Company

story
Southey Holdings (Pty) was founded
in 1939. Its original business
focus was industrial painting and
contracting services to the mining
and heavy industry sectors.
Essentials
Over the years the group diversified with
a series of autonomous, decentralized Company: Southey Holdings (Pty) Ltd,
businesses to become one of the largest and www.southey.co.za
insulation), Tate & Nicholson (cladding
most respected privately owned groups in
and roof sheeting installation), Eventscaff Region: Africa
South Africa. Originally based in South Africa,
(scaffold supply and installation), Concord
Southey now operates from permanent bases Country: South Africa
refrigeration (manufacture of refrigerated units
throughout Africa and the Middle East.
for catering and retail), Parkhome (modular Sector: Diversified industrial
The group now includes a wide range of accommodation unit manufacture), Rudnev
Business focus: Leading player in
companies, many of them leaders in their (insulated panel manufacturer for coldrooms),
contracting services, ship building and
market segment. They include: Dormac Gascon (pressure vessel manufacturer), Okapi
repairs, manufacture of oil and gas tanks
(Pty) Ltd (ship repair), Southey Contracting Industries (knife and blade manufacture),
and refrigeration rooms and cabinets
(Pty) Ltd (industrial painting and thermal Isolite (expanded polystyrene manufacture).
Investor: Aureos, www.aureos.com,
global private equity manager

The role played by investing in small and medium size


businesses in emerging markets

Private Equity Investment: Aureos Africa Fund holds 49.4%


of the share capital of Southey (Sept 2010)

Following its investment, Aureos decided Southey’s horizons: drawing on its extensive Impact Highlights
to focus its efforts on expanding international network, Aureos is exploring links With support from Aureos, Southey
Southey and introducing corporate with the shipping industry in South-East Asia undertook a strategic review of the
best practices into the business. and has introduced Southey to some of its company that resulted in identifying
other investees to explore potential synergies. new initiatives and growth prospects
Aureos together with Southey’s management
initiated a strategic review of the group. It Aureos was also instrumental in getting in other emerging markets.
looked at the performance of each business unit Southey to look beyond private equity capital Southey is now present throughout
and its potential, organizational structure and for funding. It encouraged the group to plan Africa and the Middle East. Growth
how the corporation could enhance growth, ahead and helped Southey gain access to new across the group has been around
both organically and through acquisitions. business and financing markets. Aureos is 20% per annum since 2000.
also bringing more discipline to areas such as
Casting a fresh eye on the company revealed With Aureos on board, Southey is developing
corporate governance, acquisitions and finance.
how resources and staff could be better more strategically and rigorously, and
allocated between units. The strategic review Aureos and Southey are now looking to capitalizing on international opportunities,
also showed that Southey had tremendous develop a milestone project: building Southey’s such as oil and gas in Nigeria and
pan-African growth potential, yet to be very own dry dock in Durban, Africa’s busiest construction of a dry dock In Durban.
fully exploited. Aureos identified key African port. The port of Durban is currently run by
markets for Southey’s potential expansion a state company and with increased activity Southey set up a share participation scheme
such as Nigeria (second biggest oil and gas expected in the medium to long term, for all its employees, with priority given
market in Africa after Angola) and Kenya a public-private partnership is required to ensure to previously disadvantaged individuals.
(main commercial platform in East Africa). The infrastructure capacity is in line with growth.
firm is also looking beyond Africa to broaden

September 2010
The
Southey Contracting: Onshore painting
of the Hein Bronkhorst telescope

Company
View

“Aureos has turned us into a more


professional business. We used to set
out goals at Southey but it was fairly
informal and didn’t have a detailed “We’re backing a management team we know
action plan. Aureos encouraged us to
formalize that process by adopting and a business model we trust, which mitigates
a methodology to establish our many of the risks when entering new markets
objectives and measure our progress. in Africa and other emerging markets.
That ensures we don’t just talk about
goals but actually achieve them. This along with Aureos’ international office
Aureos is helping us grow the business
network and local capability, particularly in
at a faster tempo and with a more Africa, puts Southey in a strong position.”
international outlook. We’ve brainstormed Sandeep Khanna, Partner, Aureos
new business ideas such as entering
the warehousing and logistics market
and Non-Executive Director, Southey
in Southern Africa and exploring

A force for good


further opportunities in Nigeria.”

“Aureos’s involvement
has made everyone Southey already had a solid ESG
more focused about policy in place, notably with
Southey Contracting: An offshore
rope access painter at work
creating value and regards to health and safety and
environmental stewardship, to the
getting a quicker extent that Aureos has replicated
return rather than some of Southey’s initiatives in
just waiting for its other portfolio companies.
natural growth Aureos was not only keen to uphold these
to happen.” high standards but also to improve aspects
of Southey’s governance protocols. Aureos
Barry Wickins, suggested the creation of an audit and
CEO, Southey remuneration committee to monitor the
performance of each business unit and storage vessel for a leading oil company,
facilitate reporting for external auditors. completed in an intense and challenging
Aureos also encouraged Southey to move 12 week period. Building on Southey’s
beyond mere compliance to assume a existing Black Economic Empowerment
leadership position by being proactive in initiatives, including training and a
ESG matters. A full time HS&E (health, commitment to equal opportunities
safety and environment) manager reports within the group, Aureos introduced
to the CEO and full auditing and training a share participation scheme. The
is carried out across all of the group units scheme is weighted towards previously
to ensure international norms are not only disadvantaged individuals but open
met, but exceeded. A good example of this to all Southey employees to give
in practice was the recent zero-incident them all a stake in growing and
refurbishment and refitting of an offshore enhancing the value of the business.

The Emerging Markets Private Equity Association (EMPEA) is an independent, global industry association
that promotes greater understanding of and a more favorable climate for private equity investing in
the emerging markets of Africa, Asia, Central / Eastern Europe and Russia / CIS, Latin America, and
the Middle East. EMPEA’s 270 members represent a broad array of private equity fund managers,
institutional investors, service providers, and other key stakeholders in the industry.
Contact us at www.empea.net Email: empea@empea.net Phone: +1 202 333 8171