Patrice Motsepe. Picture: SUPPLIED
Patrice Motsepe. Picture: SUPPLIED

Patrice Motsepe’s African Rainbow Capital (ARC) has bought a 25% stake in estate planning company Capital Legacy, which specialises in will drafting and estate administration, an acquisition through which the investment firm will complete its participation in the entire financial services value chain.

ARC — which has stakes in financial services companies such as Alexander Forbes, Tymebank, Santam and a few independent insurance broking and asset management firms — is actively trying to increase the share of financial services in its investment portfolio that the company said is currently at 20%-30%.

ARC said in May it had R700m to spend on acquisitions. It is likely to announce more strategic purchases in financial services firms, one of which should be the finalisation of the acquisition of a stake in Sanlam Investment’s third-party asset management unit. 

The acquisition of Capital Legacy, a relatively unknown seven-year-old company playing in a niche market, was in line with ARC’s previous deals where it invested in disruptive startups such as alternative stock exchange A2X, Michael Jordaan’s data mobile operator Rain and, more recently, in an artificial intelligence venture, the Ethos Artificial Intelligence (AI) Fund.

“We believe that Capital Legacy fits neatly into the ecosystem of financial services businesses that we assemble,” said ARC co-CEO Johan van der Merwe. He said the ultimate plan was to facilitate synergies between Capital Legacy and other companies in which ARC is invested.

Capital Legacy founder and CEO Alex Simeonides, who co-owns the company with five other business partners, said because their business will not compete with ARC’s other investments there should be opportunities to leverage off each other’s capabilities and client base.

ARC also said there should be minimal overlaps between Capital Legacy and Sanlam, which also has a wills and estate planning business, because the two operate in different segments of the market. ARC’s parent company, Ubuntu Botho, has been Sanlam’s empowerment partner since 2004.

“We don’t compete with the big insurers. Our competition is actually banks that do wills and estates. What we do is fill the gap between their products [insurers] and lawyers,” Simeonides said.

Capital Legacy drafts wills and administers execution of estates. While it has drafted more than 200,000 wills since its inception, the important part of its business is the execution or winding up of estates, and it currently does 70 to 100 of these monthly. Most of its estate administration work is not from clients whom it has helped draft wills; it is rather referrals from a network of more than 4,000 brokers it has contracted.

The company calculates how much people will need to pay in estate taxes, executors’ costs and other fees related to assets they want to leave as inheritance for their heirs. Capital Legacy makes its money by offering optional insurance to clients to cover these costs.

Simeonides said the company now has more than 100,000 premium-paying insurance customers and is attracting 3,000-4,000 in new business a month for insurance alone, most of whom come from the about 5,000 new wills clients the company gets monthly.

While Capital Legacy is not a listed company and thus does not have publicly available financial statements, Simeonides said because they use technology for most of their operations, the insurance business is profitable even after covering the costs of the other services that the company does not charge clients for.

buthelezil@businesslive.co.za