Purchase of ERM gives J&J start in risk services f
Former King firm hits empowerment hitch
Financial Services Correspondent
J&J FINANCIAL Services, a subsidiary of the group founded by former politicians Jay and Jayendra Naidoo, has snapped up Dave King's former business for R13m.
Distancing itself from the company founded by King in 1995 under the name of Specialised Outsourcing and now known as Enterprise Risk Management (ERM), J&J Financial Services has bought only the systems and "arms and legs" core business of ERM.
Following the sale, ERM will have no operating business but will remain listed on the JSE Securities Exchange SA.
This is the third major deal for J&J Financial Services this year after it bought the SA operations of Credit Suisse First Boston (CSFB) in February, billing itself as SA's largest black empowerment brokerage at the time. It also launched a private equity fund backed by Old Mutual.
While CSFB's SA operations were rebranded as First South Securities, ERM's core business will be renamed First South Risk Solutions.
J&J Financial Services co-founder Duarte da Silva said the deal would give his company three key pillars; securities and equities, the private equity fund and now risk and treasury services.
"There is a tremendous opportunity in that risk services space. Not a lot of organisations are complying with the King II report when it comes to risk management and we are making a strong move to fill that need," he said.
Da Silva said while the ERM business would form the core of J&J Financial Services' risk business, it was only a platform for future expansion into this niche.
"The opportunity is huge but you need capacity and you need empowerment, and we bring both of those to this business," he said.
Empowerment had proved a major stumbling block for ERM.
In a statement on Friday, ERM said that "despite protracted and vigorous marketing efforts" over the past year, the company had been unable to attract sufficient new business mostly because of "insufficient black economic empowerment credentials".
But J&J Financial Services will be expecting a strong performance from its purchase and CEO James Slabbert said the business already had a number of key contracts in hand as well as an existing pipeline of opportunities.
Jay Naidoo said the market for risk management and treasury services was growing due to several factors, including the implications of the Municipal Financial Management Bill and the opportunities arising from privatisation in SA and in the rest of the African continent.
The J&J deal will also divorce the key ERM business from the association with its former boss and the legal tussles in which he is involved.
These headaches include a claim of R45m against the City of Johannesburg and a long-standing feud with Umgeni Water. King was arrested in March over allegations that he bribed Umgeni Water officials to secure contracts for Specialised Outsourcing.
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