Dynastic firms and private-equity world

A Coca-Cola and the Carlyle Group, one of the world's largest private-equity firms, have acquired large stakes in family-owned businesses based in Saudi Arabia. Jon Breach, the chief executive of BDO Corporate Finance in the Middle East, which is a firm that advises companies on mergers and acquisitions as well raising finances, discusses what these deals may mean for family-owned firms in the Gulf.

What was significant about the two deals announced in December?

Those ones are of particular interest, principally because both are in the consumer space, both are based in Saudi [Arabia] and they are examples of high-profile, international investors taking an interest in the region faced with sluggish markets in the West. In both cases, these transactions are local businesses which have very successfully developed into international brands.

Why are big investors willing to purchase minority stakes in family businesses in this region?

There's been a long history of international businesses operating successfully in the region with local partners. It's essential if international businesses want to capitalise on the opportunities here that they tie up with strong local partners. I think in both of these transactions there's evidence of very well-run businesses, and those investors are willing to make those substantial investments.

Do you anticipate more deals this year?

I think international investors are looking at the region, and they are seeing strong fundamentals [such as] an average of 4 per cent GDP growth in the year [for the Gulf], which would [be more than] double the developed markets. High oil prices and remaining concerns raised by the Arab Spring lead to expectations that government spending will support underlying growth in the region.

Which sectors look the most promising for potential deals?

Both [Saudi deals were] in the consumer space. The other hot sector is health care - hospitals, clinics, laboratories and pharmacies - and education. There's a very strong interest because of the demographics of the region, supported by government spend.

How can families manage the direction of their businesses going forward if they strike a deal?

That goes to the shareholder agreement. The more that they can define how much control is exercised from all the shareholders, the better. There will be controls built into that agreement, which helps clearly to align objectives and to prevent anybody from doing anything unexpected.

How do family businesses in the UAE go about courting possible partners for big deals like this?

I think there's a both a push and pull here: the private equity investors are out there in the market looking out there for these opportunities, but equally, family businesses should look upon this as a key potential source for capital to finance organic growth or acquisitions.

* Neil Parmar

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