Part two: Brian Joffe is bringing the Bidvest Midas touch to Long4Life
The former Bidvest CEO shares his formula for deal-making and finding acquisition gems.
Brian Joffe’s (pictured) days are now consumed with building Long4Life, the lifestyle-focused company he founded after a short retirement stint which he described as “boring”.
Brian’s retirement stint was sparked by his decision to step down three years ago as Group CEO of Bidvest, the multibillion-rand industrial group. Read part one: How Brian Joffe became a serial dealmaker
Some market watchers still view Long4Life as opportunistic and are waiting for Brian to replicate the success of Bidvest.
Although both companies are different, considering that Bidvest has avoided the retail sector, they share Brian’s model of investing in businesses that are decentralised, autonomous in their structure and have an entrepreneurial culture.
Since raising R2 billion from the sale of Long4Life shares when it listed on the JSE in April 2017, Brian has rapidly built scale in the company through acquisitions.
Long4Life has so far shelled out R3.5 billion on deals.
These include, among others, the acquisition of sports and outdoor goods retailer Holdsport (the owner of Sportsman Warehouse, Outdoor Warehouse); Sorbet (beauty and grooming retailer); Inhle Beverages (a specialist in the bottling of natural mineral water and carbonated soft drinks); and Chill Beverages (a producer, packer and distributor of beverage including Score Energy, Fitch & Leedes, Bashews and Country Club).
Asked by M&A Africa about how Long4Life creates synergies with target companies post-acquisition, considering that the company is acquisitive, Brian says having the right team is important. “The only thing that differentiates good and bad assets is people. You can fix anything if you have a bit of money and good people. If you haven't got good money and good people, it doesn't matter what your ideas are.”
Brian almost added another major deal in the Long4Life stable, with the mooted R3.9 billion acquisition of footwear and clothing retailer Rage. However, Long4Life shelved plans to buy Rage, which Brian says was by mutual consent between the two companies.
The formula to deal-making
He says finding deals is usually a “slow and complex process” and that most deals were not bought at bargain prices. But he has the formula to deal-making: “be able to see something in an asset that other buyers don't.”
“If everybody sees the same thing in an asset then it becomes too competitive. I always look out for bad assets that can be converted into good performing assets. That’s a good transaction but they are few and far in between.”
He also doesn’t believe in generic financial metrics such as valuations and profitability in target companies. For Brian, it’s not that these metrics are immaterial but that they are not the sole determining factor for making good business decisions.
“Profitability, in reality, is not a vision. It's an accounting term which differentiates income from costs, but it doesn't mean anything. Many companies have gone bankrupt making profits. The only yardstick we operate with is a return on assets employed, which doesn't only tell you how much money you are making but how your funds are employed.”
He hastens to add that aspiring entrepreneurs must comply with fundamental rules of business such as having to make a reasonable return on investment, otherwise, they won’t be able to fund and grow their businesses.
Brian thinks that Long4Life is “small and opportunistic”. That Long4Life had cash resources of around R1 billion and available debt facilities at the end of August 2018, means that it has room to be acquisitive.
Size has always been important to Brian. But he is mindful of the perils of concluding deals for the sake of building scale such as overpaying for assets, difficulties in maintaining strategic clarity and focus.
These risks resonate with Brian. A mistake he regards as his biggest was Bidvest’s decision in 1998 to buy struggling printing business Lithotech France. Bidvest sold the business for a loss of €26 million in 2006 after failing to turn it around.
“We lost a lot of money because we didn't know the rules in France. But as an entrepreneur, if you don't make mistakes, then you cannot be successful.”