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Altron Corp: Band of brothers

Forget brotherly love, sibling rivalry can be a serious threat to the long-term success of family businesses – wherever they come from in the world. Just ask India's Ambani brothers whose seemingly constant feuding is not only having a detrimental effect on their own businesses, but is also damaging the reputation of corporate India in the process.

Yet in Gauteng, South Africa, the Venter brothers are a shining example of how two siblings can get along for the good of the family business.

Older brother Robbie is CEO of Allied Electronics Corp (Altron), a $3 billion telecommunications, multimedia, IT and power electronics group that employs 14,000 people globally. He has grown up with brother Craig, two years his junior, at home, school and at university where they lived together for a time. But their close personal relationship hasn't caused any serious ructions that have affected the business – or certainly none that they'd admit to.

"Every family has its challenges and I think although we could get around some of the competitive juices that naturally flow, it has been a closeness within the family and the common goal of family business success that unites us," says Robbie."We are quite different in the way that we deal with issues, but we've got a level of trust that exists and, just as my father gave me the space to take decisions relating to my business, I'm also cognisant of the fact that I need to give Craig the responsibility to manage his business in his own way."

Craig is CEO of Allied Technologies, a subsidiary that is 62% owned by Altron. He is also an executive director of the parent company, which was founded in 1965 by his father Dr Bill Venter.

Originally named Allied Electric, Altron began life as a designer and manufacturer of, among other things, semi-conductor rectifier equipment, battery chargers and inverters, which were distributed on behalf of leading French, American and British manufacturers.

Today, Altron designs, manufactures and sells a dizzying array of components – from Motorola radio systems and digital set-top box decoders to smartcard technologies and power cables – through three principal subsidiaries: Allied Technologies, Bytes Technology Group and Power Technologies.

The company was listed in 1974 following rapid expansion and today the Venter family controls 58% thanks to a dual class share structure – they own roughly 30% in economic terms. But the listing doesn't mean that the more traditional aspects of a family business culture have been lost.

"In common with other family businesses we tend to look towards the long term even though we are a public company and have the pressures of six-monthly reports," says Robbie.

The family has so far managed to balance both of these competing demands. In particular, it has been able to deliver the attractive numbers that shareholders crave, as Robbie explains. "If you go back through our group's history we've achieved some pretty extraordinary growth. Last year we grew at 35% while the year before it was 50%, but I always tell people that things go in cycles and you shouldn't focus too much on results of the past couple of years – it's more important to go back 10–20 years and look at combined annual growth rates," he says.

Over a 10-year period Altron's growth rate is in the region of 10%, which Robbie puts down in part to the family's long-term vision. However, this hasn't meant that they've been immune from criticism. "We don't believe in leveraging the balance sheet to unsustainable levels and often that's a criticism of certain market analysts who say the balance sheet is lazy or could be leveraged to a greater degree. But that's the way we prefer it," explains Robbie.

It therefore begs the question whether, given the stockmarket turmoil created by the world's financial crisis, the family would ever be tempted to take the company back into private hands. "It's a debate that we've had on an ongoing basis and we've certainly looked at all the options, but we've always come to the decision that for now a public company environment is still positive for us, particularly when it comes to raising capital," says Robbie.

One of the main drawbacks the family sees to taking the company private is that it would have to take on significant debt to leverage the balance sheet – something that the Venters feel is anathema to how they want to run their business. This classic approach to running the family business is ingrained in the family, and it's one that Robbie believes can be a beacon in the current financial gloom.

"I do think that today's conditions are much more conducive to family businesses. In fact, the long-term decision-making cycle is what is required right now. I think it does present opportunities in our personal case because companies with strong balance sheets can take advantage of opportunities to a much greater degree than companies that do not."

On leaving school, Robbie spent several years in the US where he studied for a degree and MBA at UCLA in California, before working for recently collapsed investment house Bear Sterns. However, he returned to South Africa and the family business in 1990.

His return home coincided with the release from prison of Nelson Mandela and Robbie's tenure as CEO has been tied in with this historic event in recent months. In February 2007, the South African government mandated that all public-owned entities had to subscribe to the Black Economic Empowerment Codes of Good Practice.

BEE is a policy designed to redistribute the wealth created in South Africa's economy between those races still struggling to cope with the legacy of apartheid.

In the decades before South Africa achieved democracy in 1994, the apartheid government systematically excluded African, Indian and non-whites from meaningful participation in the country's economy.

In a delicate twist, many of the businesses now signing up to BEE also became successful during apartheid, even if they did not benefit directly from it. There have been several notable litigation cases against both South African and international companies in recent years, with some household name firms accused of financial gain and human rights abuses. BEE aims to redress the balance by giving economic opportunities that were previously unavailable to non-white groups and includes measures such as employment equity, skills development, ownership, management, corporate social investment and preferential procurement.

However, while many agree with the philosophy behind BEE, it is a complex programme that has caused a few business leaders to scratch their heads when it came to its implementation. Not that Robbie saw it as an added burden.

"I think it's an absolutely essential part of the fabric of South African businesses," he says. "So, from a company perspective we subscribe to it fully. A lot of people tend to see it in a narrow light and think it's just selling some of your equity to black shareholders, but it actually goes much deeper than that." Altron focuses on all aspects of the code, which includes equity, skills and training, and representation at both management and board level.

Although criticised in some quarters for a slow response since the codes of practice were released, Altron has moved swiftly this year to launch its Vision 2012 strategy document which commits the group to implement targets that will see all of its companies being what Robbie calls "superior contributors" to BEE by 2012.

The process has already started, with the appointment of two black managers, Zakhele Sithole and Moses Sindane, to the board of Altech, while Barbara Masekela has been appointed as a non-executive director of Altron. Other black non-executive directors include: Penuell Maduna (on the board since 2004) and Jacob Modise (on the board since 2003)as well as the newly appointed Dawn Mokhobo who was appointed in November 2008.

Such social engineering is a long way from Robbie's first job at Altron. In common with other next gens he began at the bottom – working as a lighting salesman – in order to "work hard and earn the respect and credibility" of his peers.

His career really took off in 1993 when he became CEO of the company's cable business. He then held the same position at the Power Technologies subsidiary before, in 2001, he was finally promoted to the top job as Altron CEO – a position he had always coveted. However, it was much more than a simple promotion as the leadership passed from the founding generation to the second generation – a process that Robbie says his father thought long and hard about.

"He always described the biggest challenge he had from a family business perspective was to making the right decision about passing the baton to the second generation, particularly when and how it was done and how it was managed."

In choosing his eldest son, Bill Venter, 70, ensured the family line continued, but it also prompted him to split the chairman and CEO positions, which he had previously held in tandem. Described by Robbie as being an entrepreneur and a very hands-on manager who liked to be involved in all the decisions that were taking place, stepping away from a day-to-day role required a step change in his father's behaviour.

"I think he really did handle it admirably. He gave me the space to run the business, which was very important because if people saw that he was still effectively running the business through me, it would have been very difficult to accept and credibility-wise it wouldn't have looked good," says Robbie. "But he went out of his way to delegate responsibility and allow me the space to take the decisions that needed to be taken." By retaining the chairmanship, Bill ensured he still has a role to play in terms of strategy, major acquisitions and maintaining relationships with many of the group's overseas principals and customers.

But Bill didn't stop there. As a young man he never went to university, so on retiring he decided to forget the golf course and headed off to study for a MBA and doctorate, which included a thesis on the family business model.

For some patriarchs, you never truly the leave the world of family business, even when your sons are running it successfully.

Executive summary

Company: Allied Electronics Corp (Altron)

Activities: Telecommunications, multimedia, IT and power electronics
HQ: Gauteng, South Africa

Turnover: $2.1 billion
CEO: Robbie Venter
Family ownership: 57% voting ownership; 26% economic ownership

Potted history: Allied Electric was founded in 1965 by Bill Venter, a 33-year-old telecoms engineer, and three colleagues. The business began as a designer and manufacturer of semi-conductor rectifier equipment, battery chargers, inverters, variable speed drives, DC motor controls, DC power supplies, electronic signal equipment and transformers. Holding company Allied Electronics Corporation (Altron) was created in 1979 when revenues reached $8.6 million. In 2001, Bill's son Robert takes over his role as CEO while Bill continues his role of chairman. Today, Altron is one of South Africa's leading telecommunications firms with revenues of $2.1 billion.

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