Why do so many companies never sell to an outside investor or go public? Simple: they don’t want to disrupt their company culture or legacy. Acquirers sometimes have different motives. They are often short term–minded, looking for a quick dollar at the cost of long-term sustainability. From time to time we run across examples of how a large company can ruin the culture of a company they acquire or merge with. We want to thank @AdrianSaville and member @Mark_Tobin for leading us to this story.
In 2016, Steinhoff International Holdings acquired footwear retailer Tekkie Town for R3.2bn ($232 million USD). Tekkie Town operates 302 stores in Southern Africa.
Tekkie Town found a niche in the South African sports and lifestyle footwear market ten years ago due to the lack of service, attention to customer’s needs and the unchecked inflation of product prices in the market place. “Tekkie Town was also brave enough to identify and open stores in rural South Africa, living close to our purpose of bringing branded footwear to all South Africans at the best possible prices.
Tekkie Town founder Braam van Huyssteen has been a driver of the company’s Core Values.
Soon after the acquisition Van Huyssteen was made Chairman of Steinhoff’s specialty shoe division.
Everything went fine until Steinhoff didn’t pay an “earn out” scheme that was said to be agreed upon. The earn out was to be paid to executives and store managers of Tekkie Town and they were to receive 20% of the increase in EBITDA over a three year period. They have filed court papers for claims relating to the earn out.
Van Huyssteen is adamant the earn-out was communicated to the rest of the specialty division, and believes the carrot this scheme represented is one of the main reasons that arm of the business has been performing so well.
For the six months ending March 2018, it achieved comparable sales growth of 17% and like-for-like sales growth of 10%.
“When you motivate the people in this way you get the results we have been delivering. That’s why I insisted on this scheme in the first place,” says Van Huyssteen.
According to BusinessDay, this past week, Tekkie Town CIO Willem Wait sent a letter to Steinhoff.
Wait writes: “It was over these years that I’ve learned that Tekkie Town is not the shoes, or the branches, nor the building, but the individuals that worked, stressed and sacrificed alongside me in order to fulfil a purposeful life and provide for their families.”
Van Huyssteen and Tekkie Town management walked out, and this past week over 100 Tekkie Town employees have resigned.
Following the mass resignations on Monday evening, Van Huyssteen told Business Day that he would undertake to financially assist every one of his previous employees until he has personally run out of money, and views the employees of the company he founded as part of his extended family.
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