Due Diligence: ‘Spreadsheets are always wrong,’ says private equity boss

Jacci Myburgh

How we made it in Africa’s ‘Due Diligence’ series asks top players in Africa’s private equity industry about how they are mastering the art and science of profitable dealmaking and fundraising. Doing the due diligence on those who do due diligence for a living.

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Old Mutual Private Equity (OMPE) is one of South Africa’s largest and most established private equity managers. It has successfully invested over US$670m (R9bn) and returned more than $1.15bn (R15.4bn) to investors since 2004. Michael Avery sat down with Jacci Myburgh, head of OMPE.

1. Explain your investment philosophy.

Our investment philosophy at OMPE could probably best be described as partnering with people (management teams, founders, fellow shareholders and other stakeholders) we like, trust and admire with the objective of building great outcomes for our investors. Investing is about a lot of things: understanding the environment and broader cycles; identifying great businesses; executing sharply, discerning clearly between value and price; and bringing years of experience and considerable skill to bear in formulating and executing on strategies designed to enhance and improve business outcomes. But ultimately we find it’s about utilising our perspective and partnering successfully with top calibre people in achieving the desired outcomes for our investors.

2. What is the greatest investment lesson you’ve learnt?

My greatest lesson is probably that the more lessons you’ve learnt the better you become at this. Experience helps. Perspective helps. A true partnership mentality is very valuable. A healthy dose of humility is a good thing. Also, I suppose that as in life, we see things in private equity go in cycles – they don’t repeat but they rhyme. We believe that you need to have a balance between being disciplined in your DNA and processes but be adaptable to the environment.

3. Identify an untapped opportunity for private equity investors in Africa.

I think private equity in Africa is the opportunity. We believe that local institutional investors are, and have been, quite underexposed to private equity. Private equity in South Africa continues to show an outperformance over listed equity in the long term, consistent with the experience in more developed markets. Retirement funds in South Africa have much lower exposure to private equity than in say the US, Europe and the UK and we think they are missing out.

4. What is the biggest misconception about your job?

That it’s glamorous. It certainly is incredibly stimulating and multifaceted, combining investment nous, deal-making, strategy and the ability to influence – so you need lots of IQ and EQ. But it’s also just very hard work and considerable resilience is required alongside a long-term outlook and patience. One turns over lots of rocks and kisses lots of frogs and can work on something for years that comes to nothing. It’s not an instant gratification game but the opposite – patience, resilience, hard work and deep thought is ultimately rewarded.

5. Name the one deal you wish you invested in.

Apple 10 years ago! I will take the Fifth here and say that being invested in our own four funds over the last 14 years have been highly satisfactory – for ourselves and our investors.

6. What are the skills you need to succeed as a private equity investor in Africa?

Firstly, you need to understand your environment. We don’t think the suitcase approach works – it typically works better if you’re operating in your back yard where anyone is a phone call away. Again, patience and resilience are important. Spreadsheets are always wrong and things hardly ever turn out perfectly. So you need to be able to roll with the punches and keep making the right decisions in difficult times.