Finishing strong: the story of a win-win exit
First published by Mergon on www.mergon.co.za on March 9, 2023
At Mergon, we believe that partnerships are not just about achieving short-term gain, but about building long-lasting relationships that create value for everyone involved. Mergon COO Gauché Radley spoke to this idea in a recent interview, highlighting some of the key principles underpinning our partnership approach. He shares the story of 4PL, a former Mergon investee company, and how we worked closely with them to divest our investment in a way that ensured their continued growth and success.
It’s a story that underscores our commitment to building partnerships that go beyond the bottom line and create long-lasting value. Here is an overview of this discussion.
‘We have seen the transformative power of partnerships where there is trust and mutual respect, and everybody benefits in the end,’ said Gauché. ‘Unfortunately, we have also seen another reality, where motives and models are flawed, and profit and impact metrics are prioritised above all else. This leads to power imbalances and the exploitation of relationships for personal gain, ending in a situation where the ‘winner takes all’.’
‘We want to partner in a different way,’ said Gauché. ‘To show up in a way that reflects God’s heart and aim to build something meaningful and long-lasting.
A case in point
We often say at Mergon that we ‘stand alongside, not above’ our investment partners. But what does this practically look like in the way we engage with our investment partners? Gauché proceeded to illustrate his point by sharing the story of 4PL.
‘In 2020 we felt it was time to start making arrangements to sell our stake in the business. As in this case, even when the relationship with the CEO is strong, this is still a difficult conversation to have. It’s deeply personal, and it can create uncertainty. People become worried, ‘how are we going to look after ourselves once Mergon pulls out? Will the company just fold when the funding dries up?’
A seat at the table
Knowing that managing uncertainty is crucial in these situations, the team took the proactive step of involving the CEO in the discussion right from the start. ‘He was concerned about being swallowed up by a large trading company and losing his independence,’ said Gauché. ‘We assured him that we were committed to look together for a better parent for 4PL. That we wouldn’t force anyone on him but work with him and find someone whom he was happy with. Someone who was well positioned in the industry, who shared our mission and values, and could put more capital into the business. And that’s what we did.’
Having recognised the value of the CEO’s expertise and leadership, the team wanted to empower him in having a voice in decision making. Gauché explained, ‘We knew that, for the CEO to have legitimate influence and a real say around the table, he would have to have a significant stake in the business. We made shares available to him, which enabled him to become a co-entrepreneur in the business. Now he was in a good position – acting not only as the CEO but as a shareholder in the business and part of the management team.’
A win-win exit
Eventually the right investor came along. A season was set aside for the CEO and investor to get to know one another, and only once they were confident that the relationship could work, did we proceed to the next stage of the exit process. ‘We were intentional during the negotiation process about taking every stakeholder’s interest into account’, said Gauché. ‘And in the end, it all went really well. We were able to exit the business in a way that left everybody around the table still making money and still building on influence and relationship.’
Today the business is thriving, with a net worth that has doubled in value since having sold our stake. The CEO is still running the company, with much relational influence. ‘There’s a lot of trust in the room,’ added Gauché. ‘And it’s a good feeling because we really added value to the company.’
‘In a world where wealth determines power and competition is fierce, we at Mergon want to approach our capital partnerships in a different spirit of humility, said Gauché. ‘True partnership has us seeking to learn, to listen and ask questions, and trying to understand the needs and unspoken expectations of everyone involved. When we see ourselves as stewards of God’s capital, we understand that these are God’s resources, not ours. We don’t need to do everything in our power to maximise the company’s bottom line. We can focus on creating environments where everyone flourishes and there’s mutual trust and respect in the room. This not only lays the groundwork for good business – it ultimately honours God.’