When should you sell a stake in your company? What stake is good enough without losing control? What price should you settle for?
Or better still, should you sell the stake at all? Having the right answers to these questions is no walk in the park.
Enterprise looks at case studies of Kenyan firms that have resisted to sell a stake and the fortunes of those that have sold. What were the driving forces? Type of investors
Davis & Shirtliff in May 2021 marked 75 years since being founded by ex-soldiers Eddie Davis and Dick Shirtliff.
Started in 1946, the business has stood the test of time in the water and energy equipment supplies market, growing its annual turnover to above Sh10 billion.
Executive chairman Alec Davis, who has been in the business for nearly five decades since taking over from his father , Eddie, in 1976 says it has taken focused and consistent management to keep growing.
Yet for Mr Davis, one thing he has resisted for all this while has been selling out a stake to, say, a private equity firm in the name of growing.
“Many times, rushing to private investors can be the beginning of problems especially when such investors come in for, say, five to 10 years,” said Davis when the firm was marking 75 years.
“Such investors fix their energy and focus on maximising returns. They hardly care about what happens after their exit.”
For him, it has been about organic growth achieved through diversifying products, but all tied to Davis & Shirtliff’s key core competency area —water.
Founders vision It is a view that Naftal Nyabuto, the chief executive at Mzawadi, shares. The firm is a loyalty programmes provider and has been winning new clients across sectors including manufacturing and insurance.Mr Nyabuto says his team has brought the firm where it is now without external financing. It is a strategy he is not about to change.“When external financiers come in at the very early stage of a start-up, there is a lot of excitement. Most of the companies that receive financing early tend to attract a lot of attention at this early stage,” he says.“But at some point you (the founder) are no longer in control of your own vision. From our experience, organic growth creates a better foundation.”Companies willing to buy stakes in others typically take a long time scouting for the best firm to buy into, especially if they […]