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10 OCTOBER 2022
MEDIA RELEASE
The Studio 88 journey: The 10-year growth story of a founder-led business
On 4 October RMB Ventures concluded the sale of the Studio 88 group of companies to Mr Price. This marks the end of RMB Venture’s 10-year journey alongside a quality management team who have, over this period, built a formidable business in the branded athleisure space (which it markets through various outlets including Studio 88, Skipper Bar, Side Step and John Craig).
“We started the journey investing alongside the founders when one of their partners was looking to exit. The founders took a modest amount of cash off the table at the time, making space for RMB Ventures to take a 37% stake in the business. The management team wanted to embark on a growth thesis taking the business from a 100-door business (turnover R1bn) to a 777-door business (turnover to cR6bn) over 10 years,” says Cassim Motala, Co-Head, RMB Ventures.
According to Motala, the style of deals/partnerships alongside founders is vastly different to that of a deal for a typical MBO or a professional management team. A few critical elements include:
- Establishing trust and alignment with founders around who we are and how we are going to work together
- Establishing the right capital structure. This creates anxiety for most Founders. Given the nature of the business model, its growth agenda and the management team’s aversion to debt, Studio 88 was funded almost entirely with equity
- Taking time to let the business grow, not only in the number of doors, but in its level of sophistication as the business emerged from being a successful owner-managed business to a professional management team that operates the business today.
The c20% growth over the decade has largely been organic with a few acquisitions like Skipper Bar and John Craig doing well for the group. Some smaller acquisitions didn’t fare as well, which is to be expected in an entrepreneurial environment.
Says Motala: “We had to hold up the mirror and assist the management team - sometimes uncomfortably - shift their thinking - and when they did shift their mindset, they didn’t stop. At the same time, we needed to create the freedom and closeness through many informal interactions, rather than a formal board setting, which suited the nature of the team.”
As a balance sheet investor, RMB Ventures always had time, and the exit was always going to be when it most suited the founders. The engagement and courtship with the Mr Price management team (and founder) started informally, to build trust and comfort with the investment that the Mr Price team were going to make, as well as for the Studio 88 team to gain comfort for the next part of their journey. The deal structure was critical in creating the alignment with the new owners. The Studio 88 team let the deal makers from RMB Ventures largely negotiate the deal with the Mr Price team, even for the follow-on transaction - testament to the levels of trust between the teams.
Says Motala: “We are grateful to the Studio 88 management team for a great partnership, and a very successful investment. This was a really good deal, and the RMB Ventures team wishes Studio 88 and the Mr Price team continued success into the future. As the Studio 88 team like to say: There is no finish line!”
End