No “acquisitions”, bought businesses “partners” – EOH’s Bohbot defends unique growth model

Asher Bohbot EOH

The share price of tech superstock EOH hit a new high today, taking its market value to a shade under R8bn. Given the price has almost doubled (again) in the past year, it’s little wonder many are wondering when the party will end. No time soon, insists CEO Asher Bohbot. He takes great trouble in this interview to explain how EOH’s inorganic growth makes partners of acquired businesses – and claims everybody joining the group loves it so much, even with newfound wealth they stick around.  Sounds fantastic. Or a fantasy. So far, so good. For now. – AH  

To watch the CNBC Power Lunch video interview click here

 ALEC HOGG:  EOH today announced the acquisition of Sybrin.  It did not disclose a price though, but we might just hear a bit more about that from the Chief Executive in a moment.  Sybrin is a specialised developer of software for the Financial Services and other industry sectors.  Company Chief Executive Asher Bohbot joins us on the line on a day when the stock, once again, defied gravity.  EOH: at an all-time high this morning – up 26 cents to R72.20.  Asher, nearly R8bn market cap.  Did you ever think this was possible when you started?

 ASHER BOHBOT:  No, I did not think so, not at all.

 ALEC HOGG:  Incredible how the market has taken to you and just keeps pushing the share price higher and higher, but I guess that also brings new challenges for you to justify this confidence.

ASHER BOHBOT:  Look, obviously, the market has its own life and the shares has its own life in the short term, but inside the business is obviously focusing on getting the business to grow, to develop, and have a healthy, sustainable business.  What the share price of the market does must obviously feed from it, but it is not what sits in our head.

 ALEC HOGG:  I am glad to hear that, but I am also glad that you are continuing to make acquisitions that will add value, or so it seems.  Just tell us a little more about Sybrin.  It has been around for 20 years.  Why was it appealing?

ASHER BOHBOT:  It is appealing from many dimensions.  Firstly, it is very strong and healthy, both financially and internally with a very strong management team, a very strong set of around 150 people.  They are servicing a very interesting dynamic industry, mainly the Financial Services which is going through a lot of change.  Their software and their products are a catalyst in helping the change in banking sector/Financial Services/Insurance etc.  The other dimension, which fits smack into our thinking and strategy and planning is their presence in Africa, which is about 72 percent of what they do.  They have offices in Kenya, Zimbabwe, Zambia, Tanzania, and Rwanda.  They are really playing in 17 countries with just about all the Financial Services players in those countries being their customers, so it would really help our strategy of growing aggressively into Africa.

ALEC HOGG:  I am glad to see they are into social media as well.  On their website they have just tweeted, or tweeted about an hour ago, that they are now proud members of the EOH Group.  That is something that I would just like to unpack a little more with you, Asher.  Talking to your Financial Director recently, he was saying that many of your acquisitions are tip-offs from customers.

ASHER BOHBOT:  Ja.  The way we do acquisitions: firstly, it is forbidden to use the term ‘acquisition’ internally in EOH.  We understand that you would obviously use it from a financial point of view as a transaction, but the financial transaction of an acquisition is but one percent or so of the entire engagement.  Our view on what you would call acquisition is that it is actually people joining us.  It is a group of people with special expertise, special knowledge, special connections into certain industries, products and services, that choose to join us.  Yes, there is a transaction, but the essence of it is that really it is a group of people, so Sybrin is 150 people joining and becoming part of the EOH family.  We treat them as part of us.  They are integrated into the business, and are just about, without exception, pretty close to the time of the engagement a part of us as opposed to little stand-alone engagements.  EOH is not a holding company per se.  The businesses work together and feed off whatever EOH has to offer to them, and typically, they would join us and see growth immediately following, by using our extensive customer base, our strategy of engagement, our BEE profile, our access to the market, our balance sheet etc.

ALEC HOGG:  That is all very nice, Asher, but I was talking to a great investor in South Africa – a venture capital investor – and he said his biggest risk is that once people got a bit of money in their pocket, they changed.  How do you make sure that once  Steve Prowse and his team at Sybrin get a bit of money in their pocket, and surely they will through this joining, won’t they change?

ASHER BOHBOT:  Well, I do not have to voice a view.  We have facts.  We have been around for 15 years and I can hardly think of anybody who joined us through what you would call an acquisition that is not with us today – 15 years later.

ALEC HOGG:  So how do you keep them interested?

ASHER BOHBOT:  Because of the model of EOH – firstly, we are very entrepreneurial so the people that would join would continue with their ability to go out there and grow business, develop, come with ideas, and we would support them.  In fact, we will give them more muscle to make those ideas come true.  We will support them.  The way we are organised is that we push responsibility as low as possible in the organisation, so people feel empowered, and those entrepreneurs that would join us into the business would not feel that their ability, their power to influence, or their power to do, has been compromised.  It is the opposite.  They have more tools to mobilise and to achieve objectives.

ALEC HOGG:  Well, no one can argue with your model.  It has been working.  EOH Chief Executive, Asher Bohbot.

Make Better Decisions. Start your Biznews Premium FREE TRIAL today.