Before analyzing the performance Madison Financial Services (MFS), their 2016 AR provides an interesting critical time line (CTL) of the evolution of the firm. It highlights how the modern firm answered or buy dilemma. Furthermore, their history shows that they are a firm interested in growing and understand what business they are in. Their evolution has been astute for a Zambian premier company. A salient observation however,shows that their leadership has collaborative tendencies hence their use of“Nexus of contracts” in order for them to evolve from one level to the next.
Their story starts in 1992 when Madison Insurance Company (Z) Ltd (MICL) is opened as Zambia’s first private insurance.In 1995 Lawrence Sikutwa and Associates (LSA) was founded and acquired 10%interest in the insurance company. At the same time, Trans Zambezi Industries(TZI) acquires 60% the residual 30% goes to Hannover Re.
From 2000 to 2003, LSA grew and gains enough capital to ensure an increased stake in MICL with the exist of TZI and Hannover Re. Looking at the time line, it is evident that TZI and Hannover came in for a 7 to 10 year period at which point they must have realized their return on investment. Typical of Venture Capital and Private Equity firms (VC& PE) when they achieve their desired multiple. Shareholding at exit of the two leaves LSA with 62.86% and Zambia Venture Capital Fund (ZVCF) with 37.14%.A beautiful exit no doubt.
In 2004, LSA consolidates its position and completely owns 100% of Madison. At this point Madison Investment Company Limited is born. At 100%, autonomy in control is good. However, ensuring corporate governance fundamentals are adhered to is another challenge. The modern firm has many stakeholders.
In 2007 Madison Financial Services (MFS) is formed with the capital injection of International Finance Corporation (IFC)who are a bit like VC & PEs. IFC specializes in private sector development hence the value preposition of coming on board must have been attractive. LSA’s management of the firm must have been above board considering they had a 100%stake and worked well enough to attract such a noble investor. LSA reduces its stake to 80.5% whilst IFC gets 19.5%.
Between 2011 and 2013, 25% of Mfinance is acquired by Shorecap. In 2014, Madison Financial Services lists on LuSE. LSA reduces its shareholding to 60% with AFlife Financial Services getting a 10%stake at IPO. 30% of the company’s shares are floated to the public whilst the MFinance business commences deposit taking.
2015 saw the entry of Enko Capital Management (Pty) Limited via ZFI Holdings limited for a 20% stake. This in turn meant that LSA further diluted its shares to 40% with AFLife and the Public maintaining 30%. What is clear from their history is that VCs and PEs VCs have found the Madison offering very attractive. According to Steven N. Kaplan and Per Strömberg in their 2000 article “How Do Venture Capitalists Choose Investments?” it is common for VCs to consider explicitly the attractiveness of the opportunity – the market size, the strategy, the technology, customer adoption, and competition – the management team, and the deal terms. PE and VC firms have mastered the art of deal structuring and have a complex set of skills that enable them to obtain health returns by successfully selecting, monitoring and exiting their investments in companies such as Madison. We firmly believe there is something about Madison that an astute investor cannot ignore. They are an extant player in their game that has shown consistency in all facets of doing business over the long term.