DealBook newsletter deals with a single topic or topic every weekend and provides reports and analysis that will help you better understand an important topic in the news. If you have not yet received the daily newsletter, register here.
Many companies made changes to help survive the pandemic. For tech companies, the changes were also about seizing opportunities to thrive while life suddenly moved online. Few companies have balanced these risks and opportunities in so many industries and countries in so many countries as Prosus, an Amsterdam-based conglomerate that spun off from Naspers, the South African technology and media giant, in 2019.
Prosus’ holdings range from e-commerce and classified ads to grocery deliveries, fintech, and more. The group is valued at around US $ 180 billion, making it one of the 10 largest companies in continental Europe. The company operates in more than 80 countries and holds significant stakes in internet giants Tencent of China and Mail.ru of Russia. The companies that Prosus controls employ around 20,000 people, and many more work as contractors or in companies in which Prosus has minor interests.
This breadth gives Bob van Dijk, Managing Director of Prosus, a unique perspective for assessing the wealth of the tech industry, especially in emerging markets like Brazil, Russia, India and China. Will pandemic habits persist? Can regulators curb big tech? Have the markets outdone themselves? Mr van Dijk sat down for a virtual interview to assess the prospects for the technology world in the years to come.
Some pandemic pivots remain
Prosus has done relatively well during the pandemic. In the six months to September, the latest available results, sales and profits increased by approximately 30 percent. The stake in Tencent alone contributed nearly $ 3 billion to profits during this period.
When the pandemic broke out, the downturn was not evenly felt across the group’s portfolio. The upswing has similarly demonstrated how different government incentives, access to vaccines, mutations in the coronavirus, and a host of other factors have been from country to country.
The hardest hit markets Prosus operates in remain Latin America and South Africa, while Europe and North America have had their first impact on their economies, followed by an upturn. Asia has largely recovered.
The pandemic lockdowns changed consumer behavior, forcing Prosus to adapt in ways that Mr van Dijk believes will be permanent. “We have no reason to believe that they will go away,” he said, adding that the pandemic essentially “moved the future forward several years”.
In short, it means more automation and less human contact.
“We already had lockers in our e-commerce business,” said van Dijk. “It’s very, very common. We thought people would like it. It’s a non-contact delivery. “
Spurred on by the need, Prosus’ portfolio companies have found other ways to increase efficiency. “We have found that more of our business can be automated than we thought,” he said. “That drove us further down to achieve a very smooth customer experience with as few points of contact as possible.”
For example, the classifieds business OLX began asking customers to self-inspect the cars for sale in order to reduce social exposure.
“When you are forced you can think creatively,” said Mr van Dijk.
Unsurprisingly, grocery delivery for Prosus was as strong a business for Prosus as it was for Uber, DoorDash, and others during the lockdown. However, prosus companies like Delivery Hero and iFood have taken steps to maintain long-term goodwill with their partners at the expense of short-term gains. In Brazil, for example, “we paid restaurants much faster than usual,” said van Dijk. “That was actually pretty important from a cash flow standpoint” in keeping restaurants in good shape and alleviating potential tension between restaurants struggling during the pandemic and online delivery apps that are in high demand.
In business today
April 2, 2021, 3:58 p.m. ET
It was similar in India with classified ads. “We have cut fees or waived fees,” he said. “It saved people money. When things came back there was a lot of appreciation for it. “
A world of stricter technical regulations awaits you
Despite Prosus emerging from the pandemic in a position of strength, van Dijk said the company cannot escape global pressure from governments to curtail the power of tech giants in cartel, labor and other areas.
He doesn’t necessarily fight the new wave of regulation and offers a historical analogy: “When the first cars were born, there were no rules at all. If there were more cars, that wasn’t okay. “Advances in technology will of course require the law to catch up,” he said, calling the trend towards tighter regulation “a sensible move”.
A major concern of the tech giants is the introduction of so-called taxes on digital services across Europe in order to generate more revenue from multinational corporations doing extensive business in countries with little physical presence within their borders. These would not apply to Prosus, said Mr van Dijk – “we invest locally and pay taxes” – but added that the fees could undermine the industry’s profit margins.
“I understand where it’s coming from,” he said, “but sometimes the rules are a little dull.”
What could harm Prosus, said Mr van Dijk, are changes in the gig economy, especially efforts to qualify delivery drivers to employee benefits. Some drivers prefer the flexibility of being contractors and “we try to pay people fairly regardless of the legislation.” As far as he can remember, Prosus has never advocated classifying workers as salaried employees like rivals like Uber have.
Another area to watch is China, which has got a grip on some of its local internet giants. Although officials have largely focused on Alibaba, Tencent has not escaped their gaze: The company Prosus bought into in 2001 was fined last month for violating antitrust rules. It is Prosus’ largest single investment, and tougher action could hurt the conglomerate’s market value.
Despite the effort, Mr van Dijk downplayed the threat. “Our impression is that China is still very supportive of its technology giants,” he said.
The markets don’t always rise
The huge financial rescue plans put in place by many governments to fight the pandemic have released a torrent of money into the global monetary system. Much of that money went into technology.
“Technology market reviews have gotten pretty busy,” said van Dijk. “There is a lot of money looking for a return.”
Last summer, Prosus was outbid for eBay’s classifieds business, which went to Adevinta of Norway for $ 9.2 billion. That defeat followed a loss of efforts to acquire restaurant delivery company Just Eat, which Takeaway.com bought for $ 7.8 billion.
It is perhaps surprising that Mr van Dijk said Prosus did not see much competition from special purpose vehicles or SPACs, which have raised nearly $ 100 billion this year and are very active buyers of tech companies. This may be due in part to the fact that SPACs are largely a US phenomenon, although other countries have tried to bring the blank check firms to justice.
Mr van Dijk said that Prosus could potentially compete with SPACs at some point, especially for private companies at a later stage. Meanwhile, Prosus itself invested $ 500 million in a SPAC last year when the Shell company merged with Skillsoft, an education technology company.
Recently, Prosus has mainly invested in its existing businesses. “It’s still a good idea to put money into it,” said van Dijk. And a few months ago, the company announced that it would buy back $ 5 billion of its shares.
Things look a little more measured these days, said van Dijk, and ratings have fallen “to a much more sustainable level”. For a serial dealmaker, this means an opportunity: “It’s easier to make acquisitions in a market that is cooling off.”
What do you think? Can tech companies maintain the momentum they gained during the pandemic? Is the market cooling down? Let us know: firstname.lastname@example.org