Tag Archives: Strategy

My Zawya Story: Two Initial Decisions

October 26, 2014 By in Strategy, Corporate Governance Tags: ,

This post is part of the My Zawya Story series.

After the acquisition there were many decisions that had to be made by Ihsan and I, some quite contentious. Two that stand out are the new geographic location for Zawya and control of the finances of the company.

Although I am an Emirati, I founded Saffar in Bahrain, which up until that point had been the dominant financial hub in the GCC. Although Dubai had by that time taken some steps to building itself into a financial hub it was still early days and the terrorist attacks on the US on 11 September 2001 looked to be an extremely negative event for any positive developments in the region.

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Long Term Strategy in a Short Term World

October 25, 2014 By in Strategy, Strategy Cornerstone Tags:

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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 →

The Future of Investment Banking in the GCC

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

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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 →