25 Feb 2020 / Article

Sipromad: A Malagasy family business embarks on an international expansion

The private Malagasy group, one of the country’s five largest, continues to diversify and expand its business. Two years after acquiring Thomson Broadcast, the family business – as it gradually integrates the third generation of the Akbaraly clan – has thoroughly international ambitions. 

 

“The entire family has contributed to making Sipromad what it is today”. At the helm of the group founded by his father, Ylias Akbaraly, 59, believes that the “family foundation” and “values” passed down from one generation to the next are the Malagasy conglomerate’s true assets.

 

Nearly 50 years after it was founded, in 1972, Société industrielle des produits de Madagascar has become a diversified group with more than 3,000 employees. In 2017, it reported €215m in revenue, earning it a prime position among the top five largest Malagasy companies. Its business activities span broadcasting (Broadcasting Media Solutions), renewable energy (Tozzi Green) and real estate (Société immobilière des Mascareignes), not to mention manufacturing, aviation and even finance, through its shareholdings in Orange Money, Brinks, BPCE and BM Madagascar.

 

Rather than take all the credit, Ylias Akbaraly regularly reminds his children of how it all began by recounting the story of Merally Manjee, his great-grandfather. A Gujarati emigrant (i.e., from the state of Gujarat on the western coast of India), Merally founded a small business in Belon’i Tsiribihina in 1918. The undertaking specialised in collecting agricultural goods and tobacco and selling them to French authorities, who had been managing the “Big Island” since 1896. Sermamod Akbaraly, Ylias’s father, inherited Merally’s perseverance and strong work ethic. At the beginning of the 1970s, Sermamod set the Sipromad venture in motion by acquiring a manufacturing facility for household products. He was so determined to succeed that he mortgaged his suits to finance his business. And, very quickly, he came to believe that his descendants would be key to the future success of his company, which is why he didn’t hesitate to invest a considerable amount of money to send his three children, Ylias and two daughters, to study in France. Ylias would go on to study in the United States at the University of California, Berkeley, where he received an MBA with a specialisation in marketing before returning to Madagascar to help expand the family business. 

 

“My father had plans for me”, recalls the Chairman and CEO of Sipromad. Back then, Sermamod insisted that his son come back home, whereas Ylias was perfectly content to stay in the United States. In 1992, the recent university graduate gave in to his father’s wishes and entered the family business as head of sales. Shortly thereafter, he became deputy CEO and, in 1995, CEO. “The succession process isn’t always easy to manage”, admits Ylias. Indeed, he set himself apart by challenging his father’s decisions and it wasn’t uncommon for their conversations to end abruptly.

Ylias had very strong views about how Sipromad, which at that time had just 20 employees, should be run. Right away, he forced the company to undergo an external audit and then set up a sales team to sell the family business’s products. Aware of the small size of the Malagasy market (the island had 13.5 million residents in 1995 and 26 million in 2019), he initiated a business diversification strategy for the group, which notably included the acquisition of a fishing net rigging company. It was the first of a long series of acquisitions, not all of which would prove to be successful, such as the textile business. The plant the group purchased was unable to survive the major strikes that shook the island in 2002. At that time, the country was literally split into two. Due to the ports no longer being accessible, Prêt Export, the group’s textile subsidiary, couldn’t receive the raw materials it needed and was therefore forced to close. 

 

“If we hadn’t diversified our business, we would’ve never been able to withstand the political crises that occurred”, Ylias says. Multiplying revenue sources, particularly by increasing the company’s geographic footprint, helped to limit its dependency on a single sector and its home country. “Today, we’re a pan-African group that is steadily expanding on the continent and outside Africa”, Ylias adds. The leading Malagasy group has offices in Madagascar (the centre of its manufacturing operations), of course, as well as in Mauritius (the centre of its broadcasting operations), Paris and Singapore. And that’s not all. 

In August 2018, Sipromad carried out one of the largest investments in its history: the acquisition, in partnership with Thales, of Thomson Broadcast for an undisclosed amount. French group Thales took over the company’s military business, while the family-owned conglomerate took over its civilian business. “It barely took us three minutes to reach a decision”, Mr Akbaraly admits. Via the transaction, he hopes to eventually be able to export to several countries on the continent and cover the entire value chain of the broadcasting sector, an area he knows well. Through Sipromad’s subsidiary BMS (Broadcasting Media Solutions), the group entered the market seven years ago as a telecommunications equipment supplier and as a player in both the public sector (regulators) and among market leaders such as Rohde & Schwarz, which is also one of its main competitors. Since completing the deal, Ylias has injected several millions of euros into the new subsidiary and instituted a policy of responding to a wide variety of calls for tenders. The strategy is clearly a winning one given the group’s successful bid in a call for tenders in Angola for Televisão Pública de Angola. 

 

But Ylias Akbaraly doesn’t plan on stopping there. He’s eyeing new markets on the continent and elsewhere abroad, including Morocco, Indonesia and the United States. The group’s goal is ambitious, as it seeks “to become the leading broadcasting company in two years’ time” by forming ties with the best in the business: currently, Sipromad is in talks to form a partnership with the Massachusetts Institute of Technology (MIT) under which Indian and Malagasy engineers could receive broadcasting training before they start at Thomson. 

 

With the group’s external growth strategy comes a new internal strategy. Regarding governance, Ylias cherishes the following mantra: “a family group managed by high-level professionals”. In reality, the group’s subsidiaries are run by professionals who aren’t related to the family. They “are selected based on their qualifications and experience”. Ylias knows that whether from an operational or a strategy perspective, the group’s success lies with its employees. Moreover, its board of directors includes a number of chief executives from subsidiaries in addition to family members. The short-term objective is to open up the board to people from outside the company who could offer a different perspective and an extended breadth of expertise. This change is part of a wider move to reorganise the governance structure by setting up a holding company later in the year which will consolidate all group businesses.

 

This corporate governance structure will exist alongside a family governance structure characterised by a family board meeting that will take place every Sunday at lunchtime. The meeting is meant to introduce the new generation of the family to the major challenges of running a company and help prepare them for decision-making roles. The youngest family members are even encouraged to have regular conversations with Ylias and to brief him on the group’s businesses. In short, the strategy represents an effective way to gradually involve younger family members. For Mr Akbaraly, “succession planning is essential”. Today, the group is made up of three generations: Sermamod Akbaraly, founder and honorary chairman; his three children: Ylias, Chairman and CEO, and two daughters who are proxyholders; and, lastly, Sermamod’s grandchildren, including Ylias’s son, Imran, and another grandson, Faran, who are both in their 20s. Imran has been designated as the successor. According to Ylias, he could even take the reins “within five years”. Currently studying Political Science at New York University, he plans to round off his education with an MBA and then gain some job experience abroad before he joins the family business.

 

Although Ylias’s oldest daughter, Eileen, 26, certainly has the family’s entrepreneurial spirit, she isn’t currently planning on shaping the group’s future. She independently launched a luxury brand called Made For A Woman that aims to empower Malagasy village women through handicrafts. A similar social spirit can be found in the Akbaraly Foundation, which was created in 2008 as a health initiative focused on the prevention and treatment of breast and uterine cancer in Madagascar. Ylias’s wife, Cinzia, is the foundation’s president. The foundation has four health centres in Madagascar as well as a mobile unit which travels to rural areas. Between 20,000 and 25,000 women are screened every year thanks to the initiative. The Akbaraly family just can’t stop undertaking a venture of some kind, whether entrepreneurial or social.

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