Breaking Down The Jargon: Deal Structuring For BEE Ownership

Transcend BEE Advisors unpack the term "deal restructuring" when referring to the process we go through to ensure the most important BEE Ownership objectives are met, particularly when working with our multinational clients.

Advisors love using jargon. Although we do our best to use everyday English when explaining concepts to our clients, we are also guilty of using jargon. During a recent BEE ownership webinar we realised that we often take for granted that our audiences understand what we mean by “deal structuring”. 

What do we mean when we say "deal structuring"? 

Simply put, deal structuring refers to the process of establishing what the most important objectives of each stakeholder are; and designing the terms of the transaction such that most, if not all, of each stakeholder’s objectives are met.  

A few points to take note of about this process: 

• When acting for multinational companies, we often spend lots of time guiding the parent company’s board and shareholders through the complexities of local laws and policies to enable them to make informed decisions on how to proceed with the deal. 
• In Black Ownership transactions that include employee participation through Employee Share Ownership Plans (ESOPs), a simple, transparent structure is usually the best approach.  
• BEE transaction structures also need to take into account the potential concerns of the BEE Commissioner.  
• Apart from balancing the objectives of each of the stakeholders, advisors must structure within the confines of sound legal, financial, tax, and BEE advice.  
• Lastly, a deal structure is also influenced by the relative negotiating strength of the parties and where on the risk/reward spectrum the parties find themselves.  

Why do we spend so much time structuring the perfect deal?  

In our experience, spending time at the inception of the deal to carefully design the optimal deal structure, helps to achieve the following:

1. It reduces overall negotiating time;  
2. It increases the likelihood of closing the deal; and (perhaps most importantly)
3. It leads to sustainable, long-term partnerships.  

Effective deal structuring requires creative problem-solving. Although it is impossible to satisfy everyone’s objectives, the optimal BEE deal structure finds the right balance. In addition to understanding the parties’ objectives, we find that the best solutions often emerge only after we gain a solid understanding of the business at the heart of the transaction.  

If you are considering implementing a BEE ownership transaction and need advice on structuring and implementing a sustainable transaction that makes business sense, please don’t hesitate to get in touch with us.