Author Archives: Sabah al-Binali

My Zawya Story: Origins

October 22, 2014 By in Private Equity Tags:

This post is part of the My Zawya Story series.

In the second part of my Zawya story I build on the initial introduction and talk about how I got involved in the information and data business as well as how I identified Zawya as an asset.

In 1999 I invested in an IT services company and the founder invited me to the board of directors. Although this company was showing a positive P/L trajectory, the cash flow from operations was quickly deteriorating. As the board member with the only experience in financial statement analysis I investigated the issue. I traced the cash flow black hole to a pair of financial websites, Saudi Finance and Middle East Markets, that were being developed and maintained by the IT company on behalf of a client. Although the IT company was spending cash on the project, cash from the client had stopped. Continue reading →

Closing the SME Credit Gap

October 21, 2014 By in SME Tags:

In last week’s article this column laid out the case that the current SME credit gap, estimated by the IFC to be at least USD 260 billion in the MENA region, could not be closed using currently available tools and institutions. There is an argument to be made that the potential exists to close the gap as the SME sector’s contribution to the UAE’s GDP is in excess of 50% and its share of total loans is only 4% thus implying that the massive supply-demand imbalance has driven loan pricing to extremely attractive levels relative to risk. It is important to note here that it does not matter what the risk is as long as the return more than compensates for it. Continue reading →

Operational Value Creation

October 21, 2014 By in Private Equity, 1feautred Tags: ,

Many of the PE firms that I have dealt with have had difficulty in deploying an institutional approach to operational value creation post their investment in a company. Most PE firms simply revert to expending a large amount of resources in the pre-investment analysis and due diligence phase and then settle on one or two board seats to manage their assets post investment. The large imbalance resource expenditure pre and post investment leads is a warning flag. Although the board is the correct way for a PE firm to manage its assets post investment it cannot rely on the standard model of a board member acting independently. The same resources that analysed the investment need to support the board directors in governing the investment. This same analysis is also useful for companies in transition whether due to internal or external shocks.
Continue reading →

Standard Chartered UAE: Mishandling the SME Issue or just Misunderstood?

October 21, 2014 By in SME Tags: ,

The National is reporting on customer backlash to Standard Chartered’s decision to shut down their SME business in the UAE. The fact that the bank is, according to The National, “provoking fury among customers” brings into question Standard Chartered’s commitment to its clients. The article by The National reports on the bank’s excuses for its behaviour. It also reports that the bank’s clients do not accept these excuses. So what is going on? Continue reading →

My Zawya Story: Introduction

October 20, 2014 By in Private Equity Tags:

This post is part of the My Zawya Story series.

Zawya, the MENA online business media company, was my fourth private equity direct investment and has been one of my most fulfilling and satisfying active investments, not just because of the 20x cash on cash return but also because of my participation in the leadership of building the company and charting a course to a phenomenally successful business.

Continue reading →

Initiating Confrontation is Good Leadership

October 20, 2014 By in Management Tags: ,

A good manager learns how to manage conflict when it arises, as it invariably does in any organisation. A good leader learns how to initiate confrontation. This seems counter-intuitive to many people but that is because there is an incorrect presumption that confrontation is bad. I blame tree-hugging hippies for falsely promising a corporate utopia free from confrontation. Continue reading →

Leadership ≠ Dictatorship

October 19, 2014 By in Leadership Tags: , ,

In an executive position that I previously held I was building out my team and the company had a policy of recruiting internally first. This policy appeals to me in principle in that it gives employees the chance to widen their skill set and reduces recruitment costs. In theory I should also have access to superior information on the employee, but as it turns out human nature and unethical behaviour circumvents that from happening. Continue reading →

The UAE: Gateway to Emerging and Frontier Markets

October 18, 2014 By in Emerging Markets, Frontier Markets, Strategy

عربي

As the global economy continues to pick up steam after the aftermath of the financial crisis of 2008 businesses are looking for opportunities to grow. Ideas for growth have traditionally revolved around three main pillars of government infrastructure projects, tourism and domestic demand. Strong as these pillars are, and an important foundation for the economy, it is unnecessarily short sighted to restrict a business’s vision to these areas. Once the foundation is built, a regional and even global expansion should be considered.

Continue reading →

My Zawya Story

October 18, 2014 By in Private Equity

For those who may not know, I am the founding CEO of Saffar Capital, the private equity firm that invested in Zawya in 2001 taking a 60% stake and then selling it to Thompson Reuters in 2012. I was also the Chairman of Zawya from 2001 to 2011. It was an incredible investment, one that I was actively involved in for a decade and that I also learnt a lot from.

Over the next few weeks I will be publishing a series of posts highlighting some of these lessons that allowed a tiny online media company backed by a young private equity firm to grow into a regional success rivaling and surpassing international competitors with deep pockets and global experience.

I have created a static page, My Zawya Story, to keep track of all the posts.

The current publication schedule is as follows:

As each post is published I will update the schedule with the relevant links.

Sabah al-Binali

The Future of Investment Banking in the GCC

October 16, 2014 By in Investment Banking Tags: , , , , ,

عربي

Investment banking in the UAE in particular and the GCC in general saw an unprecedented jump in activity in the period 2003-2008. After a couple of decades of basic boom-bust IPO activity the explosion of activity in the equity markets triggered a smaller, but no less dramatic, growth of investment banking activity that saw the deployment of new investment banking teams in new stand alone institutions, as well as branches of international banks and divisions in local commercial banks. The global financial crisis that was triggered in late 2008 ended the expansion era. After six years in the doldrums there are whispers about the rebirth of investment banking. The opportunities do indeed exist but not where conventional wisdom is pointing.

The future of investment banking (IB) lies in selecting the right mix of services and business model. Services can be broadly categorized into four areas: equity capital markets (ECM), debt capital markets (DCM), mergers and acquisitions (M&A) and sales and trading (S&T). ECM basically consists of raising equity funding: IPOs and rights issues. Supporting services include a strong distribution network, the ability to underwrite offerings, which requires a large balance sheet, and S&T services to support post offering trading, in other words make sure that people can trade the new shares. DCM is similar to ECM except that it targets funds raised by debt. The supporting services are the same. A successful M&A practice, companies buying and selling other companies, really requires deep relationships with local and regional clients with a full understanding of their business. S&T requires infrastructure and a large balance sheet to allow clients to trade on margin. These descriptions are already beginning to point to a certain conclusion. Continue reading →