In 2012, Zawya, a UAE-based business media company, was sold to Thomson Reuters for a 20 times cash return by Saffar, a low-profile private equity company. I am the founding chief executive of Saffar and became chairman of Zawya after we acquired it, between 2001 and 2011. This is my story of how I bought a bankrupt, London-based company with five employees, moved it to the UAE, built it into a profitable company with more than 200 employees and then sold it to a global competitor, thus generating a 35 per cent annual rate of return over an 11-year period.
Category Archives: Private Equity
My Zawya Story: Finale
This post is part of the My Zawya Story series.
Saffar sold Zawya to Thompson Reuters in 2012. I have been asked many times how we positioned such a sale and how early we planned for it. My answer to any private equity exit is: build a great company and the exit will come. Talk of IPO versus strategic sale versus financial sale is meaningless. If you build the company right then all those options will be available. Build it wrong and no options will be open. Continue reading
My Zawya Story: Acquisition Negotiations
This post is part of the My Zawya Story series.
In my Origins post I set the stage for the start of discussions between Zawya, led by Ihsan Jawad as CEO, and Saffar, led by myself as CEO, for some form of cooperation. Supporting me in my negotiations were two of the directors of Saffar. Ihsan was supported by one of his co-founders, Husain Makiya.
Zawya needed funding, and Saffar had money to invest. But this was not a pure financial play for Saffar. Saffar had a long term strategy and a data & information company, which it was already building, formed the foundation of this strategy. As such Saffar decided that they must take majority control of the equity if they were to invest. The complicating factor in relation to Zawya was that due to the bursting of the internet dot-com bubble funding was tight and the founders of Zawya were faced with the proposition of having to issue far more equity then they originally planned with the prospect that they would have to relinquish control.
My Zawya Story: Origins
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
Operational Value Creation
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
My Zawya Story: Introduction
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.
My Zawya Story
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:
- Introduction: 20 October
- Origins: 22 October
- Acquisition Negotiations: 23 October
- Two Initial Decisions: 26 October
- Deciding the Business Model: 27 October
- Negative Cash Flow Lessons: 29 October
- Positive Cash Flow Challenges: 30 October
- Strategic Growth Decisions: 2 November
- The Importance of Independent Board Members: 3 November
- Global Financial Crisis: 5 November
- Finale: 6 November
As each post is published I will update the schedule with the relevant links.
Sabah al-Binali