Capital Legacy's Alex Simeonides on ARC deal: 'We are now in the big leagues'
Patrice Motsepe's African Rainbow Capital (ARC) has bought a 25 percent stake in Capital Legacy.
Patrice Motsepe’s African Rainbow Capital (ARC) has bought a 25 percent stake in estate planning company Capital Legacy, which specialises in will drafting and estate administration. Operating since 2012, Capital Legacy has drafted more than 200 000 wills or 5 000 wills per month. This is significant in South Africa as only one in four people have a valid will in place at death.
The acquisition means that ARC, which said in May that it had R700 million to spend on acquisitions, will complete its participation in the entire financial services value chain. ARC has shareholdings in financial services companies such as Alexander Forbes, TymeBank, Santam, and a few independent insurance broking and asset management firms. The value of Capital Legacy is R500 million, which implies that ARC’s investment in the firm is about R125 million.
In this M&A Africa interview, Capital Legacy founder and CEO Alex Simeonides (pictured), who co-owns the company with five other business partners, discusses the importance of ARC investing in the firm and Capital Legacy’s growth plans.
M&A Africa: Why is ARC a good fit for Capital Legacy founder?
Alex: We do most of our business via the financial advisors’ market. What this means for ARC is that they have an interest in an organisation that can do bespoke, custom, high-level and low-level wills in mass. The opportunities are boundless because ARC has other financial institutions that potentially need this offering, which is great for us and great for them. We have a large footprint of financial advisers who support us. We have about 4 000 brokers.
M&A Africa: Does this partnership give Capital Legacy access to a larger pool of ARC clients in its other financial services businesses?
Alex: This is a 100 percent spot on. ARC has new and pending investments and opportunities, which have not been announced yet. These investments and opportunities are very exciting for us.
M&A Africa: In which phase is Capital Legacy at now? Most companies need an equity partner when they are at a growth phase or when they want to build scale.
Alex: We are in the middle of a growth phase. We surprised ourselves with our growth since we started the company in 2012 and we want to have traction in the market. This requires us to have some capital in the business so that we can continue to update and roll out our affordable products for our stakeholders. We want to take our plans from blue sky to reality. ARC brings credibility to us. We have more than 100 000 clients and 4 000 brokers. We need to have a company like ARC on our stable.
M&A Africa: In South Africa, only one in four people have a valid will in place at death. Does this imply that Capital Legacy’s scope for growth is more?
Alex: Our marketing model is based on putting the broker at the forefront of trying to get a will done. I am a previous broker. And the broker is best placed to get the will done. Wills are done in life insurance and retirement planning. But it was considered to be too difficult to do. You had to fill out 300 forms and they did it wrong. We have the turn-key solution where our clients could give us a name and number to do a will. Or they can log on to our system to do a will or we can go out to them to consult on drafting a will. In South Africa, about 15 000 to 20 000 life policies are being sold a month but only 2 000 wills being done. We want to close this gap.
The current environment in the financial services is that companies must have an app or website, and clients must go to those platforms to do wills for themselves. We will never do that during my time at Capital Legacy. We believe that you need personal and face-to-face consultations to make sure that we get will drafting right. The important thing when it comes to a will is that you only have one chance to get it right. If you make a mistake, it is too late.
M&A Africa: Why did ARC only take a 25 percent stake in Capital Legacy?
Alex: We had several suitors late last year that were looking at us. We didn’t want to have a player that was going to try to influence our brokers and products for their gain. We are still an entrepreneurial company. We couldn’t give up half of our company. ARC was willing to be a long-term investor at 25 percent. And that was appealing to us. ARC is not like other equity players where they want to pump and dump.
M&A Africa: Do you have early estimates about the business opportunities the partnership with ARC will bring to Capital Legacy?
Alex: We anticipate that there will be a 20 percent increase in business. We want to launch new products that will take things to the next level in terms of the private clients’ space as well as in the education space. We will need some capital to properly do that because we are now in the big leagues.