Private equity fund takes the lead to accelerate growth at transformative 4IR start-ups
The R360 million paid by Altron for Ubusha Technologies highlights the accelerated returns on offer to private equity investors who back transformative businesses enabled by the fourth industrial revolution (4IR). JSE-listed Altron announced on 9 December 2019 that it will merge Ubusha’s identity security business with its cyber technology operations to establish Altron Security Solutions. The deal is effective 1 March 2020, subject to Competition Commission approval.
Local consumers will be familiar with Altron subsidiaries such as Netstar and Bytes Technology Holdings; but few will have heard of Ubusha. Established in 2003 the firm quickly won acclaim as South Africa’s leading provider of identity security services to a ‘who’s who’ list of banking, retail and telecommunications clients. Altron’s decision to snap up the security specialist was motivated by Ubusha’s 30%-plus compound annual growth in after-tax profit delivered over the decade ending 2018, underpinned by R170 million in revenue and R40 million EBITDA in its latest financial year.
Altron was not first to identify the potential in the firm. Ex-Dimension Data CEO, Brett Dawson, invested in the business in 2017 based on his belief that identity-based security would become an enabler for 4IR. The global economy is entering a new industrial age known as 4IR or Industry 4.0. “We are entering an age where technology and business is wholly intertwined, leading to massive changes in efficiency and customer service,” says Brett. “The internet of things, big data and cloud computing are just some of the technologies that are driving the world’s transformative transition into 4IR”. He observes that tomorrow’s private equity successes will be delivered by companies that are immersed in 4IR.
Brett has an enviable record in the technology industry having earned his stripes at businesses like Internet Solutions and Dimension Data, both of which thrived during the third industrial revolution (3IR). 3IR, which spanned the late 20th and early 21st Centuries, is described as an age of computing, electronics and telecommunications born out of improvements in energy production and the introduction of next generation microprocessors and transistors, which in turn enabled high levels of process automation. During his 10-year tenure at Dimension Data, Brett oversaw a fourfold increase in annual revenue, from $2 billion to $8 billion. He helped the IT-giant to expand from 30 countries to 58 and grow its local and international employee complement from 8 000 to more than 30 000 over the same period.
Brett has since established a private equity vehicle, CAMPAN, to identify and invest in promising early-stage start-ups that are leveraging 4IR technologies to transform traditional business models. Once an opportunity is identified Brett steps in to guide and mentor the management team and provide capital to allow them to exploit the myriad opportunities that the 4IR presents. “We invest in and nurture businesses that revolutionise customer service through the positive application of technologies such as automation, artificial intelligence, data exchanges and cloud-based solutions,” says Brett. He adds that CAMPAN has a vision to become a leading incubator of transformational 4IR businesses. The availability of capital will enable start-ups in this space to make a real difference to society and deliver stellar returns to early investors.
CAMPAN is currently a foundation level investor in BrandHubb (which revolutionises how consumers interact with the brands they love); Fourex (for fast, easy and efficient foreign exchange transactions); Free2cycle (a UK-based initiative which is reimagining the cycling commuter business model); and Wrapistry (for the ultimate gifting experience). It has also invested in NuMobile, a start-up that enables communication, collaboration and productivity in the workplace by providing smartphone and connectivity to the under-serviced, lower-income end of the South African workforce. NuMobile achieved a 25% growth in its corporate client base in 2019. Each of these businesses is leveraging technology to make fundamental and transformational differences to customer service, business processes, systems, industries and broader society.
Brett is nurturing these businesses by providing coaching and mentorship to their leadership teams as well as taking an active role in strategy, while CAMPAN provides the capital needed to accelerate their business plans. “My journey started during the 3IR when we were radically transforming thinking and challenging accepted norms in the business environment,” concludes Brett. “The next stage of the journey – navigating the transformative business environment enabled by the 4IR – will be defined by the investments made through my early stage private equity business, CAMPAN”.