No Business is Limited — Local Companies Attract Investors
Makini Schools acquired by Schole Limited
“Makini Schools have been sold to a UK-based investor for 1 Billion Kenya shillings,” read Business Daily on the 28th of March 2018. The 40-year-old school had successfully managed to raise capital and attract international investors who bought 72% of the school, leaving Dr Mary Okelo, the founder and executive director of Makini Schools a minority shareholder. Makini Schools was founded in February 1978 under the name Riara Gardens Academy as a nursery school with just eight children, where the founders, the late Dr Pius Okelo and Dr Mary Okelo, lived. The school has since organically grown and changed its name to Makini Schools.
Makini Schools was attractive to investors due to its presence in Kenya. The school that started with 8 children has since expanded and now boasts of 7 campuses around Kenya with over 230 teachers and more than 3,000 students. It additionally has a number of offshoots which include the Makini College, Makini Training & Consultancy, Boresha Limited which deals with creating digital content and the AFBE which is the first Association of Family Business Enterprises in Kenya.
Over the 40 years of operations, the management team has instituted proper structures within the institution which has ensured that Makini School is less reliant on the founder and can thus run without Dr. Okelo being in campus day in day out making it attractive to investors.
Potential investors will keenly analyse the team’s ability in executing business operations. It is imperative that the business can function without the owner. Without which, it means that once the cheque is signed and the owner takes a back seat, the business will fail. The team is an integral part of any business; how capable is the team in delivering its mandate in terms of profitability and operational efficiency? Is there a strong chemistry on the team and does everyone play nicely with each other? SMEs ought to ensure that their teams are well positioned to build and execute the business plan successfully.
Nice & Lovely acquired by L’Oreal
Not so long ago, world’s largest multinational cosmetics company L’Oreal acquired the Nice & Lovely brand in a multi-billion-dollar transaction. L’Oreal bought the Kenyan firm with an eye on East Africa’s market; it has over the last decade targeted alternative beauty markets by acquiring local brands in new markets to gain distribution networks and brands. The Nice & Lovely — L’Oreal deal is a great Kenyan story for a man who started the business in Kariobangi and eventually joined the billionaires’ club. Paul Kinuthia built Nice & Lovely products from scratch; from a start-up in the backstreet of Nairobi in 1995 to a major player in the beauty market, rivalling industry giants like Unilever Kenya Ltd and PZ Cussons East Africa Ltd.
Nice & Lovely, controlled about 18% of the hair care business industry in Kenya, based on a research done by Consumer Insight Africa. The company crossed the Sh1 billion sales mark in 2009 drawing investor interest locally and internationally. It went ahead and expanded its presence in Uganda, Tanzania and Rwanda, diversifying its product range to include soaps, shoe polish, hair items, perfumes and baby products. After the acquisition of Nice & Lovely, L’Oreal sold over 40 million units of skincare, cosmetics, hair care, hair colour and hair styling products compared to previously 2 million products in 2012 in the Kenyan market; a 1,900% jump in units sold. “The acquisition of Nice & Lovely helped us tap the low-end market given its price point. This makes it a significant business for us” L’Oreal MD, East Africa Ms Ithau.
L’Oreal tapped into the regional distribution channels the Nice & Lovely brand owned, the manufacturing plant and products which allowed the French firm tailor items for Kenyan buyers. The acquisition provided an easy solution compared to starting from scratch, which could involve buying land, putting up buildings, hiring local staff, seeking regulatory approval, struggling to gain distribution networks and fighting for market share against established rivals.
Quickmart and Tumaini Merge
In the retailers’ space, Quick mart is merging with Tumaini Self-Service limited to form a single entity under the Quickmart brand name. Currently, Quick Mart has 11 branches operating in Nairobi, Nakuru and Kiambu counties while Tumaini has 13 branches in Nairobi, Kisumu and Kajiado counties. The company is set to create a network of 30 stores by the end of 2019. The two retailers merged into one would be able to compete with retail giants such as Tuskys & Naivas who have dominated the market for quite a while. Additionally, they can now be able to share distribution networks, operational efficiencies, increased customer base and assets. The merger is beneficial to both parties since they can accelerate their growth plans as pooling their resources together improves their competitive edge.
What do investors look for in SMEs?
Profitability, operational efficiency, competitive edge, and growth potential are some of the important aspects investors observe when deliberating on putting their money into different businesses. More than anything, investors want to see a return on their money. The more profitable the business is, the better. Investors are in the business of putting money into growing businesses so they can make more money. If you can demonstrate that your business will make them money, then you’re 90% there.
Competitive edge against other players is also key. It is what will make you successful over your competitors. You need to show why your product or service is different from or better than what your competitors offer. Investors want to know that you (or your staff) have developed operating policies and procedures to control the business and ensure their investment is not wasted. Your business must have moved beyond the “fake it till you make it” phase or investors will not have confidence that your company is a real business.
As the founder, have you delegated authority to the experts? No single person has all of the skills necessary to run a business successfully. However, founders of businesses are more like parents when it comes to their business (i.e., it’s their baby). The founder(s) too often try to wear all the hats and centralize the control with themselves. Investors find comfort in a business that has a team in place; where team members have expertise and have been given autonomy to oversee their area of operation.
Join us on 31st October and 1st November for our annual Capital Raising Seminar to learn how you can prepare your business and make it attractive to investors.