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: Strategy Cornerstone
Crisis Response Strategies
In a world of uncertainty management is constantly evaluating potential risks as they unfold and deciding how to respond.
At one end of the response spectrum is what might be called the Anglo-Saxon Fast & Furious model: ignore all risks until they become an existential threat of such dire proportions that there is only one available response and it is blatantly clear to all involved.
At the other end of the spectrum is what might be called the Asian Ancient Wisdom model: treat everything as an existential threat at all times and avoid taking any proactive decisions whatsoever lest it lead to greater danger.
Adaptive Strategy Construction
In a previous post, Deconstructing Strategy, I discussed some of the difficulties in developing a strategy. In this post I present a method that has worked well for me. The philosophy behind this method is based on the two ideas that the Pareto principle, also known as the 80/20 rule, applies to business strategy and that strategies must adapt to new information and changes to the business environment.
My Zawya Story: Global Financial Crisis
This post is part of the My Zawya Story series.
The global financial crisis that broke in the latter half of 2008 was painful. At Saffar we had concluded negotiations on a partial exit of Zawya at a fantastic IRR but the crisis put an end to that transaction. The bad news continued as the crisis decimated Zawya’s core client group, financial services, and impacted revenue in multiple ways including a big decline in online advertising. We built the company and reached dizzying heights of success, where we about to now ride it all the way down again?
My Zawya Story: Strategic Growth Decisions
This post is part of the My Zawya Story series.
If negative cash flow the main characteristic of the foundation phase of a start up and break even cash flow represents the institutionalisation phase then the third phase is growth represented by increasing positive cash flows. This is where the fun begins. All stakeholders are basically happy, assuming a lack of greed, and strong excess cash flow growing at close to a triple digit rate really opens up the options in achieving your vision. The three main choices, not necessarily exclusive, are pay dividends to the shareholders, invest in organic growth and grow via acquisitions.
Deconstructing Strategy
I think that it is safe to say that most people entering the work force view strategy as some kind of mystical plan developed by all knowing executives using arcane skills. At the other end of the spectrum I don’t think that there exists a C-level executive who at least once didn’t wonder whether strategic planning wasn’t a ritualistic sham, a cosmic joke played on executives the world over. I know that I have experienced both feelings.
My Zawya Story: Deciding the Business Model
This post is part of the My Zawya Story series.
As an investor I have seen many entrepreneurial mistakes and one of the greatest misunderstandings has to be the difference between a market opportunity and a business model. A market opportunity is a gap in demand and supply, in particular a demand for products or services which is not met by current supply. This creates the potential for profit but does not guarantee it. To get from the what, potential profit, to the how, actual profit, requires a business model. I have seen many promising entrepreneurs fail even after identifying lucrative market segments simply because they jumped in without planning how they were going to convert the opportunity into revenue let alone profit.
In terms of Zawya the opportunity was clear: there was a high demand for Middle East data and information with little comprehensive supply. Ihsan and I were on opposite sides of the two main issues: how to source the data and information and how to generate revenue.
Long Term Strategy in a Short Term World
Price earnings ratios (P/E) of some of highest traded stocks in the country are crossing into the 20’s. You don’t need a lot of analysis to realise that there is no way that anyone, especially a professional asset manager, should be invested in such stocks. The dilemma for asset managers is that the reason these stocks have high P/Es is that their prices have appreciated spectacularly in the short term and avoiding them leads to lagging performance by the asset manager relative to the market and his peers, at least in the short term.
In 2005 there was a real estate (RE) boom in the UAE that was clearly unsustainable. If you were a commercial bank it was clear that continuing to lend into the RE sector was not a sound credit decision. The dilemma for the bankers is that avoiding lending to that sector would cause their profits to lag relative to their peers.
These challenges are not restricted to the UAE financial sector but are global in nature and afflict all business sectors. Indeed I believe that the global financial meltdown was driven just as much by conflicting signals as it was by greed. Continue reading