Inside the OpEx Awards: Aureos' Golden Lay

Extensive operational improvements and a strong relationship with management led Aureos to success with a Zambian egg farm, a deal that won the EMEA manufacturing/industrial category in PEI's inaugural Operational Excellence Awards.

Aureos Capital took a big risk with its investment in Zambian egg farm Golden Lay, according to our judges.

“If it came across my desk, I wouldn’t touch it with a barge pole,” judge Thomas Pütter joked.

But the risk paid off. Aureos managed to increase top line revenues by 268 percent and EBITDA by 235 percent during its five year ownership.

But achieving this growth required an awful lot of heavy lifting. The previous owners of the company had not followed any health and safety policies; there was no proper accounting and financial record-keeping in place; there was a gap in the management team; and national demand for eggs was down, due to supply shortages and the high cost of production.


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Aureos used its contacts from a hatchery operation in Zambia it had exited a few years earlier to deal with the lack of management: two family relations of that team agreed to join the team of Golden Lay.

Meanwhile Aureos successfully corporatised the business in six months, appointing a board of directors and improving the company’s financial record-keeping. And since the business had previously only sold its products in the informal cash market, Aureos also expanded its sales model to incorporate more formal channels.

On the ground, an automated poultry house was created to improve production efficiency and bio-security to comply with international standards. To reduce feeding costs, the feed mill plant was expanded too.

The judges were struck by the extent to which Aureos was able to overhaul the small African business. “I just have admiration for people that actually manage to make money in Africa; it’s the most unusual thing to do,” judge Edi Truell said.

Aureos was also active on the CSR side, setting up a three-year education project with the Zambian food

268%
increase
in top line revenue

235%
increase
in EBITDA

processing sector to address the issue of HIV/AIDS in the workplace.

“If one wanted to give a prize for entrepreneurism coupled with very hands-on transformation, Golden Lay stands out because they basically bought something blind without any warranties or guarantees – and then turned it into an industrialised business in a very difficult market, coupled with interesting aspects of CSR,” Pütter said.

What made the investment work was the genuine relationship between Aureos and the management team, according to Basil Nundwe, a partner at Aureos. “It is critical to be able to know what is going on in the business. We could call each other 24 hours a day to discuss things. If you don’t have that relationship, the management team will not disclose important information.”

Being on the same page with the management also meant the final exit was easier, Nundwe said.

Aureos sold its stake in Golden Lay in 2011 to the African Agriculture Fund, a private equity fund managed by Phatisa. It posted a 41 percent gross IRR and exit multiple of 3.48.

“I absolutely loved the Golden Lay story although I think it is madness! Big risks, but it’s worked out.” Pütter said.

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Private Equity International will be featuring all award winners over coming weeks.