Family businesses in the Gulf have for years been run by patriarchs who operated largely on instinct. They expanded rapidly to take advantage of the flood of prosperity that washed over the region.
That business approach may no longer be sufficient. "The model has been working very well but we believe the next few years are going to be very competitive," said Constantin Salameh, the chief executive of Abdulla Al Masaood & Sons, one of Abu Dhabi's largest family-owned firms.
"So if you don't have your act together you are going to miss out on opportunities," he said.
As the Gulf emerges from the global financial crisis, family businesses find themselves in the midst of a critical transition. The founders are typically approaching retirement, which raises issues about the transfer of the business to the next generation, but they also are transforming their operations to better reflect their size and global reach.
Handshake deals and business units operating without close oversight by management are becoming relics of the past.
"This is how business was done when the business was not as large and debt was not as prevalent," said Ahmed Youssef, a partner with Booz & Company in Dubai. "It is different when you are making an investment of Dh50 million and when you are making one of Dh500 million."
Mr Youssef said there were two extremes among family businesses in recent years, with some expanding too rapidly and taking on too much debt, while others grew cautiously and managed cash conservatively.
Although the latter was more common, since most family businesses still rely mostly on their own money and do not borrow heavily, Mr Youssef said, problems at a number of companies in the region that are restructuring debts have captured headlines. Some of those issues arose because most company founders are what Mr Youssef calls "restless entrepreneurs" or those who trust their instincts to guide them as they dabble in a range of businesses.
Khalaf al Habtoor, the chairman of the Al Habtoor Group, said he learnt that the "dabbling" strategy was counter-productive several years ago, most notably when he got involved in soap and jewellery businesses he did not fully understand.
"In English, they call it trial and error," he said. "Sometimes when an idea is proposed to you by friends, you are shy … But joining hands with them makes losses. Since that time, we are only concentrating where I know my people understand the language of it."
This lesson is increasingly important, as many observers believe sponsorship laws and other regulations will be liberalised in coming years, leading to increased competition for local firms.
At Al Masaood, which specialises in "small to medium sized businesses with steady cash flows", according to Mr Salameh, the group's leadership is in the process of transferring more than 40 of its businesses into a holding company called Al Masaood and Sons. That company will consist of only those businesses in which Abdulla al Masaood, the chairman of the company, and his sons Humaid and Khalifa own a majority interest.
Instead of each business operating almost autonomously, as they did before, the companies in the new structure will share services including legal, human resources and banking. Particularly in regard to banks, the new structure should allow the holding company to negotiate better terms and conditions, Mr Salameh said.
This structure is also significant because the practice of "name lending", in which banks lend to prominent family businesses without conducting as much due diligence as they would ordinarily, is out of favour. "That trend has stopped, or at least slowed down considerably," said Walid Chiniara, the co-founder of the Family Business Advisory Group.
Mr Chiniara said such structural changes were also increasingly being done with succession in mind, which other analysts agree is critical. From countries with more developed economies, it is clear that the handover from the founder to his children is often smooth. It is the next step that causes problems. "If you look at the experience worldwide in countries that have gone through this, the transition from the second to the third generation is very tough," Mr Youssef said. "If you don't have that regulated well enough, it might create chaos."
Mr al Habtoor said he was well aware of that. He has already concluded that the best solution for his company is to hold an initial public offering, possibly within the next year or two.
"If you leave it only as a partnership, the partners will fight. This is not my opinion - it happens all over the world," he said.
Other family businesses may choose the same route, while others may look at selling or spinning off units of their business. The big Gulf conglomerates are evolving just like any other business, Mr Youssef said, but the huge growth in the region meant the stakes of managing the changes ahead were that much greater. In some cases, the skills that created successful businesses may not be the same ones required to thrive in the years ahead.
"How many executives in this region have the experience of taking a company global? Very few," he said.
breagan@thenational.ae
COMPANY%20PROFILE%20
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Pari
Produced by: Clean Slate Films (Anushka Sharma, Karnesh Sharma) & KriArj Entertainment
Director: Prosit Roy
Starring: Anushka Sharma, Parambrata Chattopadhyay, Ritabhari Chakraborty, Rajat Kapoor, Mansi Multani
Three stars
match info
Manchester United 3 (Martial 7', 44', 74')
Sheffield United 0
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
OTHER IPL BOWLING RECORDS
Best bowling figures: 6-14 – Sohail Tanvir (for Rajasthan Royals against Chennai Super Kings in 2008)
Best average: 16.36 – Andrew Tye
Best economy rate: 6.53 – Sunil Narine
Best strike-rate: 12.83 – Andrew Tye
Best strike-rate in an innings: 1.50 – Suresh Raina (for Chennai Super Kings against Rajasthan Royals in 2011)
Most runs conceded in an innings: 70 – Basil Thampi (for Sunrisers Hyderabad against Royal Challengers Bangalore in 2018)
Most hat-tricks: 3 – Amit Mishra
Most dot-balls: 1,128 – Harbhajan Singh
Most maiden overs bowled: 14 – Praveen Kumar
Most four-wicket hauls: 6 – Sunil Narine
WOMAN AND CHILD
Director: Saeed Roustaee
Starring: Parinaz Izadyar, Payman Maadi
Rating: 4/5
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
more from Janine di Giovanni
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
More from Neighbourhood Watch:
UK's plans to cut net migration
Under the UK government’s proposals, migrants will have to spend 10 years in the UK before being able to apply for citizenship.
Skilled worker visas will require a university degree, and there will be tighter restrictions on recruitment for jobs with skills shortages.
But what are described as "high-contributing" individuals such as doctors and nurses could be fast-tracked through the system.
Language requirements will be increased for all immigration routes to ensure a higher level of English.
Rules will also be laid out for adult dependants, meaning they will have to demonstrate a basic understanding of the language.
The plans also call for stricter tests for colleges and universities offering places to foreign students and a reduction in the time graduates can remain in the UK after their studies from two years to 18 months.
KILLING OF QASSEM SULEIMANI
Killing of Qassem Suleimani
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Killing of Qassem Suleimani
DIVINE%20INTERVENTOIN
%3Cp%3EStarring%3A%20Elia%20Suleiman%2C%20Manal%20Khader%2C%20Amer%20Daher%3C%2Fp%3E%0A%3Cp%3EDirector%3A%20Elia%20Suleiman%3C%2Fp%3E%0A%3Cp%3ERating%3A%204.5%2F5%3C%2Fp%3E%0A
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Killing of Qassem Suleimani
MATCH INFO
Kolkata Knight Riders 245/6 (20 ovs)
Kings XI Punjab 214/8 (20 ovs)
Kolkata won by 31 runs
House-hunting
Top 10 locations for inquiries from US house hunters, according to Rightmove
- Edinburgh, Scotland
- Westminster, London
- Camden, London
- Glasgow, Scotland
- Islington, London
- Kensington and Chelsea, London
- Highlands, Scotland
- Argyll and Bute, Scotland
- Fife, Scotland
- Tower Hamlets, London
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
