Merchant West celebrates 20 years in financial services

For two decades, Merchant West has organically grown its business across the financial services sector. Today, as the company celebrates its 20-year anniversary, it is regarded as one of SA’s biggest independent financial services providers.

“The business started in 1998 as a subsidiary within a listed asset management firm,” says Merchant West group CEO Braam Viljoen. “We then recognised the huge potential that existed for a specialised financing business in the local market and subsequently underwent a management buyout in 2002.”

Mike Murray, group sales director at Merchant West, believes a number of subsequent strategic decisions paved the way for the company’s decades-long run of growth. “All business units are independently operated by skilled executives who have surrounded themselves with industry specialists.” 

The directors have also continually reinvested in the business to expand and diversify its product offering over the past 20 years. “During this time we’ve seen many of our competitors fade away. This inspired us to evolve our business models and service offerings to ensure that we remain relevant in an ever-changing market.”

Viljoen adds that Merchant West’s service offering remains inspired by a fresh, innovative and customised approach to age-old business challenges. “We constantly strive to deliver flexible, innovative and customised solutions that meet our clients’ needs and address prevailing market demands.” 

A fundamental enabler of this ability was when the business secured its own lines of funding via a securitisation in 2005. “This was a major turning point for the business as it meant we were less reliant on the big finance houses and banks to structure lending deals. The securitisation programme was subsequently listed on the JSE in 2016 and has been AAA rated by both S&P Global Ratings and Global Credit Rating Co,” says Viljoen. 

By operating as a primary funder, Merchant West was able to establish itself as an agile business with an entrepreneurial approach. It is therefore capable of creating opportunities to grant credit where other financial services providers might be more constrained in their ability and willingness to lend. 

“This has allowed us to realise our vision of becoming the leading independent specialist financial services company in our chosen market by providing tailor-made financial services to our customers. We’re nimble enough to work in alliances with the commercial banks and do the work necessary to provide them with transactions that meet their  risk appetite and requirements,” says Viljoen. 

To expand its offering and core competencies, Merchant West has continued to develop a diverse range of products and services that cater to specific and defined market needs. “Our organic growth stems from our strategic solutions-driven approach and our focus on diversification into specialised lines of business to meet our clients’ unique financial requirements,” says Murray. 

Today the company offers a range of services that include specialised business finance, asset leasing and advisory services. “We offer banking products such as Asset Finance, trade finance, specialised finance, Working Capital Finance, Capital Markets Trading, full maintenance leases, insurance and private leasing of vehicles.”

Merchant West’s Asset Finance solutions span various industries and market segments and are aimed at helping customers, suppliers and intermediaries design tailor-made, tax efficient and cost-effective financial solutions. 

“Our Asset Finance, credit and legal teams combine experience, expertise and a solid understanding of operational, financial and transactional complexities to offer Asset Finance products and solutions. We consider every deal on merit and will explore any viable business opportunity,” says Viljoen. 

To meet this mandate, the Merchant West credit team conducts a full analysis to understand a client’s business before presenting deals at one of the three daily credit committee sessions. 

“We believe this approach, which includes advice, professional support and proven finance expertise, helps our customers expand their business operations and unlock value, while remaining cognisant of the need for stringent cash flow management to maximise productivity.”

In terms of its Working Capital Solutions, Merchant West can help businesses improve their cash flow management and planning with solutions that leverage the placement of orders with suppliers or raise cash against unpaid trade debtor invoices.

The Merchant West Capital Markets division operates across multiple treasury asset classes and has been assisting small and medium-sized enterprises and corporates with holistic risk management solutions. These include the hedging of currency risk, interest rate risk and commodities for trading, bridging finance, offshore exposure, short-term investments, forex and cash management. “Our traders have financial markets and banking experience, which enables our clients to focus on their core business,” says Murray.

In terms of private vehicle leasing, through its Ariva business, which is jointly owned with the Imperial Group, Merchant West has created a niche for itself within a market that is typically controlled by the major banks. “Ariva is the largest dedicated private rental finance provider to South African consumers. Private rental has all the same characteristics as traditional instalment sale finance from commercial banks, but with added benefits and flexibility.”

In terms of the business structure, Viljoen explains that each division complements the other. “Over time we have created a comprehensive vertically integrated value chain that is able to meet a diverse range of a client’s financial needs, regardless of what a client may need initially. Whatever division they use as an entry point into the business, we can support the full spectrum of their business-related financial requirements.

This model has proven to be an important source of growth for the business, with Merchant West deriving more than 60% of its new business from existing customers. “In this regard, our success is predicated on our understanding of every client’s unique requirements and the strong relationships we have created by being so intricately involved in their businesses.”

Merchant West is also active in a broad range of industry sectors. These include technology, telecommunications and office automation, capital goods, including mining and manufacturing, renewable energy, aviation, transport and logistics, leisure and hospitality, agriculture, construction and the medical and public sectors.

This industry diversification has mitigated sector-specific risk as there is no concentration in industries that are prone to economic shocks. “We’ve also benefited from this market diversity to exploit industry-specific opportunities by carving out niche pockets of competency where we can effectively play against more established lenders.” 

The company is also well capitalised and has good scope for growth within the South African financial services market. To support the operation and continue to deliver on this growth potential, it has expanded from a geographical perspective. 

Today it has a wide national footprint, with a head office in Sandton, branches in Pretoria, Durban, Cape Town and, more recently, Port Elizabeth, with another branch due to open in Nelspruit in early 2019.

“We have also created sustainable jobs for more than 180 professionals, who are predominantly graduates and therefore offer excellent skills and market expertise. They all play an important part in realising our mission, which is to be the leading specialist financial services company by delivering exceptional service to our customers and partners and by creating value for our stakeholders.”

With a broad footprint, specialised and niche lines of business and highly competent staff who are able to improve the fortunes of their clients, Merchant West has realised progressively higher incremental gains in annual revenue.

“We currently advance close to R2bn a year in new finance to our customers. Revenue growth has also accelerated significantly in recent years. We will reach R2bn in half the time it took the company to achieve R1bn in annual advances. We are also proud that this funding has helped to grow the economy by stimulating various sectors and that it delivers significant downstream benefits, while also providing value to customers, shareholders and staff.”

To commemorate 20 years of business, Merchant West has used this milestone to refresh the brand and its corporate identity. “After two decades we felt it was time for a change. It offered us an opportunity to modernise our brand in line with changes to the business, while also communicating to our clients and the broader industry that our successful business continues to grow and evolve. Our new, bolder brand is symbolic of our refreshed approach and our renewed strategic intent, which we believe will fuel our continued growth for another 20 years and beyond,” says Viljoen. ​

For more information visit the Merchant West website.

This article was paid for by Merchant West.