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The Impact of Private Equity on GCC Family Businesses

About Ithmar CapitalAbout Dow Jones & Co.Methodology

2

About Dow Jones Private Equity Dow Jones Private Equity (www.privateequity.dowjones.com), a unit of Dow Jones Financial Information Services, is the leading

provider of finance and investment data to the private equity industry. Its reports, newsletters, directories and conferences deliver

the insights private market professionals need on the latest trends, deals and the people behind them.

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Methodology The findings in this report are based on aggregate data from Dow Jones’ unique research processes. The data was collected

through interviews with leading figures in the private equity sector, industry analysis and secondary sources. The term ‘private

equity’ in this report refers to investment in securities via a negotiated process. No statement herein is to be construed as a rec-

ommendation to buy or sell securities or to provide investment advice.

Ithmar Capital is a GCC-focused private equity

specialist, managed by an outstanding team of

highly experienced leaders with unparalleled

local and international knowledge and

connectivity.

From offices in Dubai and London,

Ithmar Capital targets exceptional growth

capital and buyout opportunities through-

out the GCC region and overseas, provid-

ed the GCC region represents a strategic

market for the overseas companies. Ithmar Capital is

actively committed to using its unrivalled resources and

international connectivity to support strongly the suc-

cess of its portfolio companies. With a focus on innova-

tion, Ithmar Capital is at the cutting edge of its indus-

try, always looking at new ways of adding value to part-

ners and portfolio companies.

Ithmar Capital is the first regional private equity

specialist to enter into a strategic alliance

with a global private equity leader – 3i. This

groundbreaking partnership combines local

and regional knowledge with a network

which offers truly global reach and expertise.

Ithmar Capital is currently managing

proprietary investments in excess of $500

million in some of the most attractive regional sectors

including oil and gas, construction, healthcare and edu-

cation. Ithmar Capital’s driving vision is to become the

leading GCC private equity firm through the delivery

of exceptional returns and conduct.



3



Editorial: Nicholas Smith

Design & Production: Brett Gillett, Ray-Michael Peterson, Tara M. Sapienza

Dow Jones Private Equity, Commodity Quay, East Smithfield, London E1W 1AZ | Sales +44 203 217 5176 | http://privateequity.dowjones.com

© Copyright 2007 Dow Jones & Company, Inc. All Rights Reserved.

Table Of Contents

4 Foreword & Acknowledgements

5 Executive Summary

5 The Context

Figure 1. Private Equity Fundraising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Figure 2. Private Equity Value Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

9 The Issue: Restructuring & Market Strategy

What Private Equity Can Deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Figure 3. GCC Oil Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Figure 4. GDP in Absolute Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

11 The Issue: Governance

Figure 5. LPs Expected Returns from PE Commitments, by Region . . . . . . . . . . . . . . . . . . . . . . . . . .12

Figure 6. Emerging Market M&A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

What Private Equity Can Deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

14 The Issue: Succession, Management & Boards

Figure 7. Average Family Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Figure 8. Projected Population Growth 2006-2050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

What Private Equity Can Deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Figure 9. Equity Market Performance 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

19 Approach Required From Family BusinessFigure 10. Comparative Sales & Revenue Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

21 Approach Required From Private Equity Firms

24 Case Studies

Al Touq Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Gulf Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Kanoo Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

27 Bibliography



Foreword

& Acknowledgements


Faisal Bin Juma Belhoul,aisal Bin Juma Belhoul, Founder & Managing Partner,ounder & Managing Partner, Ithmar Capital thmar Capital

Khaldoun Haj Hasan,haldoun Haj Hasan, Co-Founder & Managing Partner,o-Founder & Managing Partner, Ithmar Capital thmar Capital

4

Ithmar Capital (www.ith-

mar.com), in partnership

with Dow Jones, is delighted

to announce the publication

of our second thought-lead-

ership report, The Impact of Private Equity on GCC Family

Businesses . Following on from our landmark paper The

Impact of Private Equity on the GCC released in June 2007,

this definitive report will provide the most in-depth insight

and analysis of the current and future synergies between

family-owned businesses and private equity firms within the

GCC. It offers authoritative interviews with key decision-

makers both within and outside the region, and benefits

from the unique research strengths and experience of Dow

Jones. The report therefore constitutes a defining moment

in the understanding of the impact of a rapidly-expanding

asset class on a dominant business model, and the informed

views and expertise on show will set the agenda for discus-

sion and analysis of the future of both family businesses and

the private equity industry within the GCC.

Special Thanks To –pecial Thanks To –HE Sheikh Mohammed Bin Faisal Al Qassimi, Chairman & CEO,

Manafa, Sharjah, United Arab Emirates

Mr. Abdulmohsen Al Touq , General Manager, Al Touq Company, Riyadh, Saudi Arabia

Mr. Ranjit Bhonsle, Partner, Ithmar Capital, Dubai, United Arab Emirates

Ms. Jessica Canning , Director, Global Research, Dow Jones VentureOne,San Francisco, United States of America

Mr. Phil Gandier, Partner & Head, Transactions Advisory Services Group,Ernst & Young Middle East, Riyadh, Saudi Arabia

Mr. Mishal Kanoo, Deputy Chairman, Kanoo Group, Dubai, United Arab Emirates

Mr. Rabih Khoury , CEO, Emerging Markets, Dubai International Capital,Dubai, United Arab Emirates

Mr. Muhannad Qubbaj, Managing Director, Business Development, Gulf Capital, Abu Dhabi, United Arab Emirates

HE Dr. Omar Bin Sulaiman, Governor, Dubai International Financial Centre,Dubai, United Arab Emirates




Executive Summary

5

• Only 30 per cent of family businesses survive

into the second generation, and less than six per

cent of family businesses beyond the third gen-

eration.

• Within the GCC, over 90 per cent of all commer-

cial activity is estimated to be controlled by fam-

ily firms. These firms number over 5,000, hold

combined assets of more than $500 billion, and

employ 70 per cent of the workforce.

• GCC private equity fundraising reached $10 bil-

lion in 2006. Private equity has already been the

foundation for success for family firms the world

over. Family businesses in Europe which partnered

with private equity firms increased exposure to new

markets by 60 per cent, with two-thirds also out-

performing their competition.

• The average value of private equity-backed busi-

nesses doubles at the point of exit after an average

ownership period of just three and a half years.

• Family business owners should be mindful that

despite the popular perception of private equity

as synonymous with short-term cost-cutting, the

bulk of growth in private equity-owned firms in

fact derives from organic revenue growth and

acquisitions. Employment levels remained the

same, or even higher, at exit versus entry in 80

per cent of US deals and 60 per cent of

European deals.

• Owners must recognize that private equity can

offer unparalleled experience in meeting their

capital restructuring, market repositioning, man-

agement optimization and governance needs.

• Private equity also enables the definitive separa-

tion of business ownership from business manage-

ment, and the development of family firms into

institutions, rather than ‘one-man shows’.

• Such re-engineering is required if firms are to suc-

cessfully compete in both their global and domes-

tic markets, leverage maximal internal and exter-

nal knowledge, and fully address ownership suc-

cession issues.

• In turn, private equity investors must differentiate

their expertise and clearly demonstrate their

value, whilst always remaining sensitive to the

regional business culture. There is a learning curve

in operation for all parties, and the focus on value

creation must become a constant one for families

and investors.

• Both must be aware that value derives as much

from factors such as motivated and incentivized

management as from capital resources. It may

simply need unlocking, rather than creating anew.

• The ongoing intersection of family businesses and

private equity in the GCC presents a unique

opportunity for both parties. This opportunity

can only be exploited fully through a radical

engagement between the two. This engagement is

becoming a matter of urgency.

• If partnerships between private equity firms and

family businesses in the GCC can successfully cre-

ate an environment in which managers can act as

owners and owners no longer need to act as man-

agers, then all parties can confidently look to a truly

competitive future.



creation2. Within the GCC these figures are even strong-

ly weighted, with over 90 per cent of both all commer-

cial activity and non-oil-related GDP in the region esti-

mated to be controlled by family firms. These firms

number over 5,000, hold combined assets of more than

$500 billion3, and employ 70 per cent of the workforce4.

The status of family businesses is strongly influenced by

the range and influence of their networks, a concept

which encompasses not just immediate relatives, but a

wider matrix of relationships, associates and partners.

These networks are the primary channel for doing busi-

ness. To give just one example, many firms rely heavily

on short-term financing, and this usually depends on the

development of strong banking relationships rather than

any formal, contractual commitments. Often overlooked

is the fact that the growth and maintenance of such net-

works is supported by the geographical concentration of

their participants, a result of the increasingly urban

nature of Gulf societies. The desert topography of the

region means that urbanization rates have reached 90 per

cent in Kuwait, 80 per cent in Bahrain, 85 per cent in

Qatar and 70 per cent in the United Arab Emirates5.

Some of the biggest names in GCC family business-

es include Bin Mahfouz, Al Rajhi, Kanoo, Al Zamil, Al

Jamil, Al Touq, Al Fahim and Al Futtaim. In the absence

of any obligation for these highly private firms to pub-

Socially, politically and economically, the six Gulf

Cooperation Council (GCC) countries are organ-

ized in the form of extended families. The family, with

its associated networks, is the central element in business

in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the

United Arab Emirates, and has persisted in its tradition-

al importance in the face of rapid growth and modern-

ization across the GCC. An individual’s principal social

and economic support comes from their family net-

works, and there is a strong cultural preference that busi-

ness opportunities should be focused, if at all possible,

within the family rather than outside. Perhaps more than

anywhere else in the world, business in the Gulf is a

question of personal fulfilment, and as much a means to

enhance a family’s social standing and prestige rather

than a purely wealth-generating, market-driven activity 1.

In a sense, investors in both the GCC and the global

markets have no choice but to engage with family firms.

Family-run businesses – defined as firms of which a sin-

gle family controls the ownership, at least through con-

trol of the board and usually also through involvement

in senior management – are dominant worldwide. For

example, in the United States, family-controlled busi-

nesses represent 35 per cent of the Fortune 500 List, gen-

erate 50 per cent of GDP, and account for 60 per cent of

the country’s employment and 78 per cent of new job


The Context

6



7

growth is expected to reach 6 per cent by the end of 2007,

and economic restructuring is gathering pace6. Of particu-

lar importance are the rising numbers of privatizations of

state-owned assets, as GCC governments look to address

shortfalls in infrastructure financing and increasing pres-

sure on public services. Interest in the region is also increas-

ing from international firms looking to hedge risks and

compete in an increasingly globalized market, and who are

also aware that the GCC markets are not yet dominated by

any one single player. Consequently, as Muhannad

Qubbaj, Managing Director, Business Development at

Gulf Capital states, “there are anywhere between 80 to

90 firms focusing on the region, whether from abroad

or setting up locally. If you look back two years, there

were closer to 20 firms”. Private equity investors in the

licly report their results, balance sheets are not usually

open for scrutiny, making anything beyond the most

basic performance assessment little more than specula-

tive. As Phil Gandier, a partner with Ernst & Young in

Riyadh explains: “By nature, private companies, any-

where in the world, are not transparent. The difference

in the GCC is that they are even more private. They are

family-owned, they don’t have independent directors and

they don’t have to file public documents. They are more

private than privately-held companies elsewhere. You’ll

get very large private businesses in other parts of the

world and they’ll almost be institutions, whereas in the

GCC they are still very private”. However, it is obvious

from a consideration of public assets that family firms

dominate key sectors, including real estate, automotive and

retail. This is in part due to the fact that international com-

panies wishing to expand into the region, particularly in

the United Arab Emirates, have until recently been faced

with protectionist markets and a requirement to operate

through a sponsor, with the role of local agent or franchise

representative consequently becoming highly lucrative. In

turn, capital-rich family companies have also contributed

significantly to overall economic development in the

region by plugging many of the gaps left by underdevel-

oped capital markets, with their extensive internal capital

resources assuming the role normally played by banks,

institutional investors and financial markets in more devel-

oped economies.

Of course, not every GCC family business is run in

the same way. However, a certain consistency of struc-

ture can be identified. This structure is normally com-

plex, a reflection of asset holdings across different sectors

and the involvement of extended family networks. Assets

are usually in the name of the founder or founders, there

is cross-ownership between entities and a single manage-

ment team for multiple businesses, and inter-group

accounts are the norm.

Meanwhile, the private equity industry in the GCC

continues to grow at a remarkable rate. Fundraising in the

region reached $10 billion in 2006, up from $5.7 billion

in 2005, and there are several reasons why further growth

is expected. Revenues from record energy prices have driv-

en liquidity levels to over $1.5 trillion, regional GDP


$5.7B5.7B

$25.8B25.8B

$10.0B10.0B

$33.2B33.2B

0

10

20

30

$40B

Amt. Raised ($B)in all Emerging Markets

Amt. Raised ($B)in GCC

20062005

Sources: Khaleej Times & EMPEA

Figure 1: Private Equity Fundraising

€45050

€90000

0

200

400

600

800

1000

Average Valueat Exit ()

Average Value of Firmat PE Investment ()

Source: Ernst & Young

Figure 2: Private Equity Value Creation



8

growth markets. This is only likely to increase, as the

pace of reform in the GCC continues to grow at a

remarkable rate. The result of these outward and inward

flows can be summarized in a single word – competi-

tion. Family businesses, perhaps for the first time, have

to compete both abroad and at home.

To complicate matters further, family firms in the

GCC are also facing a unique socio-historical situation.

Each of the Gulf states assumed their specific contempo-

rary form within the past 75 years (Bahrain in 1971,

Kuwait in 1961, Oman in 1970, Qatar in 1971, Saudi

Arabia in 1932 and the United Arab Emirates in 1971)8,

and the formation of the vast majority of family busi-

nesses in the region has taken place within this time-

frame, with the quadrupling of oil prices in the early

1970s a significant driver of business creation and

growth. This historical context means that businesses are

approaching a significant transition point between gen-

erations – founders or second-generation owners are

looking to transfer ownership (both internally and exter-

nally) of firms created 30 or 40 years ago. Family firms

are also mindful that the evidence from other geogra-

phies offers the disturbing prognosis that only 30 per

cent of family businesses survive into the second genera-

tion9, and less than six per cent make a successful transi-

tion beyond the third generation10. The need to address

these internal questions whilst simultaneously respond-

ing to a massively evolving business environment there-

fore represents the most pressing problem that family

businesses in the GCC have ever confronted.

This paper will examine the three most fundamental

issues facing GCC family businesses at this point of

unprecedented change, and suggest that private equity is

uniquely positioned to deliver lasting solutions to each of

them. It should be noted that although each of these issues

in itself is sufficient for a family-owned firm to consider a

partnership with a private equity firm, the separation of

these questions is to some extent theoretical, as in practice

they are often inter-related and most, if not all, family busi-

nesses in the region face them to some degree. A program

of recommendations for the approach required from both

family firms and private equity investors in order to realize

the full potential of this opportunity will also be outlined.

established Western markets have, by and large, been high-

ly successful in achieving their primary goal of rapid value

creation – a consideration of the 100 largest European exits

by private equity-backed firms in 2005 shows that the aver-

age enterprise value of these businesses doubled to 900

million at the point of exit after an average ownership peri-

od of just three and a half years7. However, there remain a

number of issues which may, at least initially, restrict the

private equity sector in the GCC from reaching these

heights. These include uncompetitive exit markets, incon-

sistent and often restrictive regulatory regimes, underdevel-

oped human capital and management pools, and strong

investor interest in government-owned infrastructure

resulting in a reinforcement of existing market segmenta-

tions, restriction of technology development and overall

limiting of economic diversification. If these issues can be

successfully addressed, the GCC has the potential to

become a truly global player in the private equity industry

– especially since the high proportion of private companies

in the region, in comparison to the more significant num-

bers of public companies in the West, means that private

equity in the GCC can perhaps be considered a main-

stream asset class rather than an alternative investment.

Phil Gandier adds that “because the overwhelming

majority are private firms, a large proportion will even-

tually transition to a public company and private equity

will play an important role in that transition”.

The intersection between a dominant business

model and a rapidly expanding investment class can

therefore be seen, in many ways, as inevitable. It should

also be remembered that businesses which can generate

superior profits, as family firms in the GCC undoubt-

edly can, are always likely to attract investor capital.

However, the fact should not be obscured that this bur-

geoning relationship is also being driven by more com-

plex factors. The operating environment of family busi-

nesses in the GCC is rapidly changing. Strong econom-

ic conditions have led to cash-rich conglomerates look-

ing to grow and expand both domestically and, increas-

ingly, outside their home markets. The reverse is also

beginning to happen, as international businesses move

into the region attracted by ongoing economic liberal-

izations of previously protectionist structures and strong




9

approach to what they are doing. When there is no focus,

they under-perform – and their ability to create value is

affected”. It should also be noted that the increasing size,

scope and complexities of family businesses have also left

owners struggling to maintain the strong personal relation-

ships which form an integral part of business practice in

the GCC region. Family businesses may be traditional;

increasingly, the markets in which they operate are not.

What Private Equity Can Deliver

Efficient business restructuring and strategy develop-

ment are inseparable from successful private equity activi-

ty. Private equity investors focus strongly on core assets,

and seek to unlock maximum business value through a

measured process of portfolio rationalization. Business

structures have to make sense and assets must be focused.

Private equity firms, both prior to and following an invest-

ment in a company, expend a great deal of time and ener-

gy in understanding where the company’s true market lies

– an analysis which covers channel, product, geography

and customer segment – and where it succeeds or fails to

generate acceptable returns. Investors then support busi-

ness units where high returns are available and work to

improve units delivering low returns. Family conglomer-

ates in the GCC can be refocused around a selected num-

Family-owned businesses in the GCC encompass a

diverse range of interests, often including construc-

tion, real estate and retail operations complemented by

general investment portfolios. Acquisitions have histori-

cally taken place on a fairly ad hoc basis, with limited

importance placed on strategic synergies or portfolio con-

sistency, and such structures have traditionally made sense

due to a lack of specialization across primary industry sec-

tors. However, strong cash positions have opened the door

for aggressive takeover strategies, and traditional family-

owned conglomerates are looking for growth opportunities

outside their home markets. In some sectors this is in fact

a necessity, as Abdulmohsen Al Touq, general manager of

the Al Touq Company, explains – “one problem is that the

markets can be quite small and restrict certain companies

from growing and becoming significant. This is unless these

companies have expansion outside the GCC territories, and

there is recognised revenue coming in from international

operations”. Combined with moves into the GCC by glob-

al firms attracted by growth markets and liberalizing

reforms, the resulting intraregional and international com-

petition is making it harder for GCC family businesses to

capitalize on new investment opportunities and consoli-

date domestic positioning. Sheikh Mohammed Bin Faisal

Al Qassimi, Chairman & CEO of Manafa, summarizes the

situation as follows: “The operating environment is becom-

ing more competitive for the family business as we see the

emergence of big conglomerate companies reaching the

international level for their financial resources and the

quality of their management. Obviously these companies

can increase their market share to the detriment of the tra-

ditional family business”. In this environment, the often

haphazard structures of these firms is proving to be a hand-

icap as they try to manage unrelated assets and businesses

whilst simultaneously increasing growth and competitive-

ness across a range of markets. This is particularly challeng-

ing when management teams are expected to support mul-

tiple businesses simultaneously. Mr. Al Touq continues:

“you find that a lot of people have a very fragmented


The Issue: Restructuring

& Market Strategy

$1,500B1,500B

$730B730B

0

600

1200

$1800BRevenues (in $B)

2002-20061997-2001

Source: Institute of International Finance

Figure 3: GCC Oil Revenues



11

tant or very important to have in place12. The conse-

quences of this are significant, with incomplete gover-

nance policies which fall short of global standards carry-

ing the risk of deterring potential international partners,

straining relationships with local financial service

providers and lenders, and reducing liquidity opportuni-

ties in both the public and private markets. Simply put,

poor disclosure standards do not allow a reasonable level

of due diligence during investment, partnership or exit

processes. A negative effect on business performance can

also be seen as an almost inevitable result, with almost

two in three institutional investors in the Gulf claiming

that poor corporate governance levels represent a signifi-

cant barrier to strong market performance13. Within the

GCC, the same investors have identified Saudi Arabia

and Dubai as the markets where improvements have yet

fully to take hold, with Kuwait and Oman more

advanced on the road to reform14. On the whole, how-

ever, the situation is slowly beginning to improve, with

two factors in particular being of especial importance.

Firstly, GCC corporations completed over $26 billion in

acquisitions in the United Kingdom, Europe and North

America in 200615, and such strong international activi-

ty is resulting in increasing alignment between local gov-

ernance standards and international best practice. This

trend towards the acquisition of foreign assets is also

If a single issue stands out for investors considering

opportunities in the GCC, it would be corporate

governance. This is not to claim that the GCC has a

monopoly on such concerns, with governance continu-

ing to represent a high-profile issue for players in the

United States markets in particular. However, it cannot

be denied that questions continue to be asked about how

GCC businesses approach regulatory compliance and

transparency processes – and in fact, these same ques-

tions are rapidly becoming a preoccupation for the busi-

nesses themselves. Family firms in the GCC have tradi-

tionally been run in a certain way, with decision-making

processes often informal in nature, with a corresponding

lack of wider scrutiny and transparency. Decisions are

usually made by owners and top-tier management, with

little or no accompanying structure or framework.

Investor relations are simply not a priority, with most

firms failing to develop adequate channels of communi-

cation between owners and other stakeholders, be they

existing or potential. Such obscurity usually extends into

auditing and general compliance issues, with many firms

lacking any formal corporate governance system. A par-

ticularly concerning statistic is the fact that 68 per cent

of companies in the region have yet to implement any

formal fraud prevention program, despite over one-third

of the same businesses rating such a program as impor-


The Issue: Governance



order, and the fact that it still has a distance to travel

before meeting international standards may indicate

that family firms in the GCC have yet to consistently

embrace the cause of change.


The ultimate goal of any private equity investment is

value creation. Firms seek to successfully grow compa-

nies to the point where they can be profitably exited.

Any successful exit presupposes certain things about a

business, not least how it is run and governed. It there-

fore stands to reason that private equity has an interest in

developing excellent levels of governance and compli-

ance, and perhaps the most long-term effect of a partner-

ship between a private equity firm and a family-owned

business is to transform the latter from a ‘one-man show’

into an institution. Institutions are run according to

agreed-upon rules, and are characterized by defined

responsibilities and deliverables.

This consistent focus by private equity investors coin-

cides with an increased recognition by businesses in the

GCC themselves that effective internal controls can have

a positive impact on both business performance and cor-

porate governance. Many firms in the region are volun-

tarily seeking to improve their governance and control

frameworks to be in line with practices adopted by large

global corporations. So what are the primary benefits of

high corporate government standards for private compa-

nies? Perhaps the most obvious consequence is reduced

risk of fraud and financial malpractice – whilst there is

no suggestion that this is more prevalent in the Gulf

than anywhere else, it seems clear that rigorous internal

controls and checks minimize the risk of such problems

arising, regardless of the business or geography involved.

High governance levels also have the effect of increasing

overall operational efficiency, with access to information

and data flows between owners, boards and managers all

optimized, which in turn can have a positive impact on

profitability. A further consequence is improved credit

status and ability to secure debt financing. GCC family

businesses rely heavily on short-term funding, and cred-

it has previously been based on personal relationships

between owners and bankers, and the facts that these

expected to grow significantly. Secondly, central banks

in each of the GCC countries have amended their reg-

ulations to comply with Basel I and II, and are starting

to require businesses to establish disclosure in financial

statements, implement board level audit, compensation

and nomination committees, and create strengthened

risk management processes. Consequently, the risk pro-

file of the region amongst international limited part-

ners is changing, and in fact the MENA region as a

whole is now seen as a more attractive investment

opportunity than the United States. However, the fact

that such a level of progress is possible is an unflatter-

ing reflection on the previously existing governance


12

17.2%7.2% 8

0

5

10

15

20

25%

Average IRR, net

A

l l E m e r g i n g

M a r k e t s

M E N

A L a t i n

A m e r i c a A s i a

R u s s i a / C E E U S

23.1%3.1% 23.1%3.1%21.6%1.6%

22.8%2.8% 22.6%2.6%

Source: EMPEA

Figure 5: LPs Expected Returnsfrom PE Commitments, by Region

$643.3B643.3B $662.9B662.9B

0

200

400

600

$800BAmount ($B)

2007 to date2006

Source: Dow Jones

Figure 6: Emerging Market M&A



13

separate ownership of a previously integrated family busi-

ness unit, rigorous corporate governance and credible

cash statements can enable access to local debt facilities

otherwise based on the use of wider family assets as col-

lateral. Hence the interests of family businesses and pri-

vate equity firms are perfectly aligned on this point.

It is the contention of this paper that family business-

es in the GCC should set an early precedent and develop

best practice guidelines and controls, regardless of

whether they are publicly-listed or not. Sheikh

Mohammed adds the suggestion that this procedure be

combined with wider succession management processes,

explaining that “the secret of success is for the first gener-

ation or founders to take the initiative and draw up the

corporate governance in the presence of the second gener-

ation in order to share their thoughts and outline any dif-

ferences. By doing so, a committee will be created, bring-

ing different age groups together to achieve a common

goal”. Private company governance in the GCC should

mirror the principles of public company governance

worldwide. As outlined above, such a policy will immedi-

ately increase the growth potential and credit access of

businesses, reduce the likelihood of fraud, and ultimately

put them in a stronger position for a public transaction or

increase their appeal to private buyers. Ultimately, robust

corporate governance policies will aid in maximizing the

exit value of any transaction. This approach is also vital if

GCC family businesses are to grow on an international

scale and meet the demands of global partners and

investors for full transparency and consistent governance

standards. High standards of governance always exert a

positive influence over investor confidence. It should also

be said that companies operating in a region that has his-

torically suffered from poor corporate governance levels

have even more to gain from making this step.

companies enjoy strong asset coverage and shareholder

support, rather than the presence of effective corporate

governance processes. However, local banks are tighten-

ing the rules, and are beginning to place a significantly

stronger emphasis on governance when developing debt

covenants, credit ratings and other lending guidelines.

Furthermore, large-cap funds overweight companies

with strong corporate governance, and firms in the top

ten per cent of governance ratings consistently score

above average in return on equity, return on assets and

return on capital16.

It cannot be stated enough that the ultimate objective

of private equity is a simple one – rapid value creation. As

Rabih Khoury, CEO, Emerging Markets at Dubai

International Capital remarks: “Corporate governance

reflects on valuation. It makes a company more valuable

because for an investor there's less risk. Applied correctly,

corporate governance protects everybody – owners,

investors and employees”. A good corporate governance

policy is essential if a business is to be truly valuable and

attractive. Private equity firms are intensely aware that

successful exits are much harder to effect without such

policies, and expend considerable time and energy in

implementing the most rigorous and externally-credible

systems possible. They push the agenda for the introduc-

tion of better internal controls and are nothing if not

strongly proactive in this approach, which often outpaces

the still-developing regulatory requirements applied by

governments and financial regulators. Jessica Canning

summarizes the situation as follows – “successful private

equity is inseparable from successful corporate gover-

nance, and firms consequently have years of unique prac-

tical experience to offer family businesses in implementing

effective frameworks and controls”. It should also be

noted that in the case of a private equity firm assuming




The Issue: Succession,

Management & Boards

14

sion issues go beyond purely formal significance and

assume important practical implications for the day-to-day

running of a firm. It is these issues that are becoming high-

ly pressing for firms in the GCC. Numerous family busi-

nesses created following the formation of the modern Gulf

states continue to be run by first-generation leaders and

founders, individuals who are now entering their 60s, 70s

or sometimes 80s. The required transition in ownership is

complicated by several issues. The most obvious of these is

the sheer size of family groups in the region, even before

consideration of their characteristic extended networks.

Although the most famous example of this phenomenon,

namely the Saudi royal family with its estimated member-

ship numbering around 7,000 individuals17 (with some

sources claiming this figure should in fact be closer to

25,00018), is an exceptional case, families in the GCC are

without question large by global standards. In fact, the aver-

age family size in Kuwait is ten persons19, with Qatar fol-

lowing with an average of eight persons, while the figure for

the United Arab Emirates is 7.28 persons20, 6 in Oman21

and 5.2 in Saudi Arabia22. In comparison, the average fam-

ily size in the United States is 3.2 members23, and 2.03

members in the United Kingdom24. Furthermore, birth

rates in the Middle East and North Africa region as a whole

are the highest in the world, with the most recent popula-

tion estimate of 280 million representing a four-fold

A s elsewhere in the world, family businesses in the

GCC are usually focused on remaining as such. In

fact, family members are often involved in regional firms to

an extent that in the West would perhaps be criticized as

nepotism or cronyism, although in the GCC the idea of rel-

atives occupying a large number of key positions is still

widely accepted as a means of reinforcing family networks

and ties. In consequence, ownership passes principally

between generations rather than external shareholders or

investors. In fact, as the ownership of a business is often

inextricably linked with management of the business, the

latter also passes through generations, meaning that succes-


100

8

0

4

8

12Average Family Size

U K U S

S a u d i

A r a b i a O m

a n U A

E

Q a t a

r

K u w

a i t

7.28.28

65.2.2

3.2.2

2.03.03

Sources: Various

Figure 7: Average Family Size



15

encourage employees to feel they have a meaningful stake

in its success. Secondly, historical statistics indicate that

once management ownership of a business exceeds 50 per

cent, returns begin to deteriorate28. Finally, a question

remains whether such a management model is in fact sus-

tainable in an environment in which family firms are not

only growing, but doing so in an increasingly internation-

al fashion. Although it seems distinctly unrealistic that

such centralized and non-collaborative decision-making

processes can continue to meet the needs of family busi-

nesses in the Gulf, the transition to a more delegation-

focused approach has thus far been slow in materializing.

A related issue is the standard of boards in GCC com-

panies. Board sizes generally comply with international

standards – with a United Arab Emirates average of 7.6

members – and board cross-membership is limited to five

companies29. However, a serious issue exists in respect to

composition. Minority shareholders are severely under-

represented at board level, and family firms are extremely

reluctant to admit outsiders to boards. In the United

Arab Emirates, there is no legal restriction against multi-

ple members of a single family sitting on the board of a

single company. The top five families in the United Arab

Emirates account for around 17 per cent of total board

seats, while the top ten families represent 25 per cent30.

Family domination of businesses in the region therefore

extends beyond ownership to board positions, which has

at least three major implications. Firstly, it limits the con-

increase from 1950, with an expectation that this figure will

itself double within the next 50 years25. The projected pop-

ulation increases from 2006 to 2050 are consequently spec-

tacular for the individual GCC countries, with Bahrain

expecting a 56 per cent increase, Kuwait 91 per cent, Oman

50 per cent, Qatar 86 per cent, Saudi Arabia 96 per cent,

and the United Arab Emirates predicted 94 per cent. This

compares to a 40 per cent projected increase for the United

States and just 14 per cent for the United Kingdom26. The

results of all this are large (and constantly expanding) fam-

ily networks, which pose particular questions for business

owners planning succession programs.

Business ownership succession is an essential process

to get right. Evidence from the European Union indicates

that some 30,000 businesses cease operations each year

due to a lack of effective succession planning, a situation

which affects around 300,000 employees27. The situation

is further complicated by the existence of more than one

category of family member – i.e. those who wish to

remain involved with company leadership and those who

do not. In the Gulf states, the most traditional course of

addressing the former is to transfer control of the business

to the eldest son. However, this always carries an element

of risk, with recipients varying in experience, acumen and

enthusiasm. A certain proficiency in conflict manage-

ment is also required, with multiple family members

often feeling a strong sense of personal entitlement

towards key management positions. Dealing with the lat-

ter category is also a conundrum. Family members may

wish to exit their stakes for a variety of reasons – the num-

ber of these individuals may exceed available manage-

ment positions, they may wish to cash in their holdings

in a strong market, or simply choose to pursue alternative

interests. Whatever the motivation, the question of how

to manage this process remains.

Aside from size, the structure of family groups is also an

issue. For family businesses in the GCC, company owner-

ship, management and board often all amount to the same

thing. Decision-making processes are therefore often infor-

mal and distinctly authoritarian in nature, with involve-

ment very rarely extending beyond owners. The first ques-

tion is whether this is the most effective way to leverage the

expertise contained at all levels of a business, and to


56%

91%1%

0

20

40

60

80

100%Growth (in %)

U K U S U A E

S a u d i

A r a b i a Q a t a r

O m a n

K u w a i t

B a h r a i n

50%0%

86%6%96% 94%4%

40%

14%4%

Source: Population Reference Bureau, World Population Data Sheet 2006

Figure 8: Projected PopulationGrowth 2006-2050



processes is to make them planned and proactive phenom-

ena, ensuring that knowledge remains within the compa-

ny whilst simultaneously creating space to leverage exter-

nal expertise. Succession is an emotional issue, which is

complicated by the fact that it is often crisis-driven and

precipitated by issues such as illness or unexpected death.

The resulting business and management reorganization

often – and understandably – proves to be haphazard and

not in the best long-term interest of either the business or

the owners. Private equity investors are neutral outside

parties who act not on sentiment, but solely in the inter-

ests of the businesses with which they partner.

For those family members who no longer wish to be

involved with a business, private equity also offers the most

viable exit strategy. This becomes clear from a consideration

of the alternative liquidity options on the table. Floatation

is not yet a serious prospect for the majority of companies

in the Gulf, mainly due to the limited development of

regional public markets. For example, the Dubai

International Financial Exchange (DIFX) only began oper-

ations in late 200531, and markets in the United Arab

Emirates in 2006 were among the most underperforming

in the world, despite record earnings growth from some of

the companies listed on these exchanges32. Six of the world’s

ten worst performing exchanges in 2006 were located in the

Middle East33. Legislative changes are now underway – the

United Arab Emirates has recently introduced legislation

permitting family firms to sell minority stakes at the point

of initial public offering (IPO), with the new 30 per cent

minimum sale down from 55 per cent34. As Dr. Omar Bin

Sulaiman, Governor of the DIFC, explains, “there is no

doubting the fact that the reluctance of family businesses to

give up controlling stakes has been a factor holding back

development in some of these markets. This is of course

understandable, but still remains a barrier to faster eco-

nomic development and improved economic diversification

for the region. The UAE’s initiative to allow family-owned

businesses undertaking IPOs to retain majority stakes is a

positive step forward in encouraging a more healthy and

entrepreneurial attitude to development opportunities” 35.

However, it should also be emphasised on the other hand

that the impact of this decision on the number of listings

will not become immediately apparent. Concerns have also

tributions of outside expertise to the business. Secondly,

closed boards can impact business performance and

financial results. Finally, it has a direct negative effect on

accountability, with family owners in effect responsible

only to themselves.


This paper suggests private equity can deliver a two-

stage management optimization process for GCC family

businesses.

The first stage is the final and complete separation of

business owners from management. Although a long-

accepted approach for some businesses, it is far from stan-

dard practice. This is a necessary step if a business is to be

transformed from a ‘one-man show’ into an institution,

and is the most effective way both to leverage the knowl-

edge contained at all levels of a business, and to benefit

from outside expertise. It also means growth of a business

is no longer restricted by the owner’s time and energy, and

minimizes the disruption which succession issues can

cause to daily operations, whilst enabling families to retain

overall control and direction of the business from a board-

room level. In addition, partnering with a private equity

firm enables the establishment of a formal ownership

structure, which delivers full clarity on the appropriate

level of involvement for each family member, regardless of

the size of the family group in question. Overall, the most

important contribution of private equity to succession


16

-34%34%

-40

-30

-20

-10

0

10

20%

S & P

F T S E 1 0 0

N a s d a q

B a h r a i n

K u w a i t

A b u D h a b i

D u b a i

-16%16%

-5%5%

10%0% 11%1%14%4%

-38%38%

Source: Reuters

Figure 9: Equity Market Performance 2006



17

ness, with the firm freed up to benefit from experienced

independent outsiders in senior management positions.

Furthermore, private equity investment, unlike HNWIs

or other family groups, has a single-minded, consistent

intention – value creation and rapid growth. The exit sit-

uation can, to be blunt, be framed as the choice of profes-

sionals over another family and their related issues, equity

over debt, and – perhaps most importantly – a disclosed

agenda over a hidden agenda.

The second part of the proposed strategy is the induc-

tion of professional managers and board members. Whilst

still benefiting from the overall direction, intellectual capi-

tal and invaluable strategic experience of family members,

family businesses in the GCC can also exploit the human

capital networks of private equity firms in order to opti-

mize the day-to-day operations and growth of the business.

This is achieved through the appointment of institutional

managers for each separate asset class and business unit,

enabling each unit to benefit from an individual manage-

ment team who in turn have a strongly focused remit. Such

an introduction by private equity firms of outside manage-

ment also offers something else. The driving factor behind

the success of private equity in more developed markets is,

quite simply, a distinctive management approach. This fol-

lows from the very nature of private equity, and in many

ways is very different from the approach still dominant

within family businesses in the GCC. The difference can

best be illustrated by a consideration of objectives. As has

been repeatedly stressed, the private equity vision centres,

purely and simply, on rapid and substantial value creation,

with purchase, growth and exit all taking place, on average,

within three to five years. Leadership teams are immediate-

ly aligned around this performance-focused vision, which

demands management salaries to be correlated with results,

which are themselves governed by consistent and rigorous

performance metrics, parameters and deliverables.

Decision-making processes are also extended throughout

the management strata, rather than being concentrated in

the owners and selected top executives, with the introduc-

tion of a more collaborative, inclusive management style

based on consensus. The principal difference between this

approach and the granting of management stock options

by publicly-traded companies is that the latter simply gives

risen that such minority stakes, which represent insubstan-

tial proportions of a firm’s total market capitalisation, run

the risk of illiquidity and being ultimately meaningless.

Share prices may also be negatively affected if the company

in question continues to be run as an essentially private

concern. Muhannad Qubbaj points out that “Saudi Arabia

has allowed this for quite some time, but I haven’t seen a

rush of family businesses coming to the market. So maybe in

the UAE you will have more families going public than you

would have otherwise had, but I don’t foresee a rush of fam-

ilies waiting in line to go public”. Other territories within

the GCC still require a majority sale, which would in all

probability permanently alter the family character of the

business. In any case, most family businesses in the GCC

are still too small to seriously consider life as a public com-

pany. The more realistic strategies of a secondary transac-

tion involving a high-net worth investor (HNWI) or a

trade sale also fail to satisfy – the former simply complicates

matters by introducing another family into the business,

whilst the latter involves numerous conditions and compa-

nies being saddled with often sizeable debt levels. It is true

that merger and acquisition (M&A) activity in emerging

markets such as the GCC continues to grow, reaching

$662.9 billion so far in 2007 from the previous record high

of $643.3 billion for the whole of 2006. In the third quar-

ter of 2007, emerging market M&A bucked the global

trend with an increase of 7 per cent against the second quar-

ter of 2007, and compared to a 45 per cent decline for

developed countries. M&A in these markets is increasingly

important, and has thus far accounted for 17 per cent of

global activity this year, compared with only 11 per cent in

200036. The United Arab Emirates has been particularly

involved, carrying out 19 transactions valued at $24.9 bil-

lion37. However, the number of potential acquiring entities

remains relatively small, and regional players are increasing-

ly looking overseas rather than closer to home, with the

consequence that M&A is currently not a realistic exit strat-

egy either for family business owners in the GCC.

In contrast, private equity is eminently appropriate. It

is strongly focused on the region, and has the flexibility to

enable some family members to cash in on their holdings

and generate liquidity whilst allowing the family as a

whole to retain overall control and direction of the busi-




18

Business Schools both starting operations in Dubai over

the previous 12 months and the educational resources of

the Middle East in general receiving a major fillip from the

unprecedented creation of a dedicated $10 billion founda-

tion from the Ruler of Dubai, Sheikh Mohammed Bin

Rashid Al Maktoum42. However, the full effects of these

developments will take several years to be felt, and busi-

nesses without access to private equity continue to experi-

ence difficulties in filling top management positions.

Private equity investors are activist investors, and stan-

dard practice involves bringing in a team to work with

existing management, and the taking of one or more

board seats. The boards of private equity-backed compa-

nies tend to be fundamentally different from those of pub-

lic companies. The board takes a far more active role in the

day-to-day running of the firm, and consists solely of

owners, representatives of the private equity investors, and

industry experts whose explicit job is to help management

create and execute strategy. This represents a dynamic

solution to the issue of sub-standard board composition

within GCC family businesses. The majority of private

equity personnel are specialists with many years of experi-

ence, and the level of expertise required for employment

at these firms is reflected in the relatively concentrated size

of private equity houses – in Europe, the average team of

investment professionals consists of only 40 or 50 people,

including ten to 20 partners, with the top private equity

investors in the US having even less, with an average of

only five to ten partners and 15 to 20 staff 43. The global

growth of private equity as an asset class over the past

decade has stimulated a genuine flow of talent towards the

industry, with the result that partners include uniquely

experienced and successful business leaders as well as

finance professionals. Even if regional board legislation on

the whole fails to provide adequate safeguards regarding

composition, it is nevertheless strongly in the interest of

family firms to take a lead in the area.

Private equity, in conclusion, can address these pressing

issues through access to talent, which it can then success-

fully attract and retain through the offer of attractive finan-

cial returns and a stake in the company’s success. The result

is an alignment of the economic interests of all parties in

order to focus on maximizing the value of the business.

managers a stake in the parent company, rather than the

focused interest in their immediate business unit intro-

duced by the private equity methodology. Private equity

investors will not hesitate to act quickly and decisively to

replace managers who fail to deliver according to these

high standards, without being bound by the need to avoid

the fluctuations in share prices that such high-profile

actions often induce in public companies. Furthermore,

executives are often required to contribute substantial

amounts of their own capital to any deal. The consequent

effect of the introduction of such a ‘performance culture’

on management mindset and psychology is profound.

Perhaps for the first time, executives are motivated to

embrace change and drive true growth, and have a real

and meaningful stake in the success of the business.

Beyond the satisfaction of creating a successful business,

the potential financial rewards on offer are undoubtedly

attractive. Management compensation packages are not

required to stand scrutiny from public shareholders, and

the rewards following a successful exit are substantial – in

the United Kingdom, the average equity profit from a pri-

vate equity exit stands at £290 million, of which the top

management of a company receive around 17 per cent.

The CEO accounts for about 30 per cent of this figure,

and the remainder is normally shared between the next

top ten managers38. Aside from leveraging and incentiviz-

ing existing expertise in this way, private equity is also

uniquely positioned to supplement company manage-

ment with outside talent where necessary. The deep

human capital networks accessible to private equity firms

can help to plug the ‘talent gap’ identified in the GCC in

particular, where there has been years of under-investment

in management- and business-focused education. Dr. Bin

Sulaiman stresses that “as we see the extensive expansion of

the local and regional economy, we also recognise that

human capital is a necessary resource, which needs to be

developed aggressively if the region is to achieve its true

growth potential”. He continues – “to achieve our ambi-

tious plans and economic targets, we will need a much

larger pool of management talent. This can be aided by

harnessing the skills and entrepreneurial culture of the pri-

vate equity industry” 39. The situation is certainly begin-

ning to improve, with the London40 and Edinburgh41




19

Approach Required

From Family Businesses


a certain conservatism inherent in the region’s wider cultur-

al background.

There is another, more subtle issue to consider. The pri-

vate equity opportunity for these firms also involves a read-

justment to a loss of absolute control over a business which

they have, in all probability, run for several decades. This is

not necessarily a straightforward step, as owners are used to

making almost every decision themselves. Suspicions also

persist that the involvement of outsiders may, in some way,

compromise the confidentiality of internal business infor-

mation and processes. Abdulmohsen Al Touq underlines

that “there are the ‘old generals’, who are definitely reluc-

tant to open up their capital structure due to many reasons.

They feel it is an integrity issue; they don’t want anyone to

mess with their company. There is a real reluctance, and

there will be a reluctance, and this will continue even after

twenty years”. In addition, family members are not always

comfortable with closer scrutiny, however well-intentioned

– in short, nobody ever looked over their shoulder before.

The result of this mindset is that owners can feel insecure

with the new situation, even if they themselves have insti-

gated the partnership and the competence of the new man-

agement is not in question, and continue to attempt a fully

hands-on approach.

These issues all need to be addressed if family firms are

to fully realize the benefits of the GCC private equity

W hat kind of approach is required from the region’s

family businesses if the full potential of the GCC

private equity opportunity is to be realized? The short

answer is that this approach needs to be a radical one.

Owners will not only need to modify the way they have

previously done business for many years, but also address

certain aspects relating to their mindset. This is a major

challenge, as the perspectives which owners bring to their

business activities is, at least in part, informed by a wider

socio-cultural framework. This framework influences busi-

ness in numerous ways. From the point of view of engag-

ing with private equity, the most serious of these is the

prevalence of a strong cultural bias against selling in gener-

al, the dominant assumption being that anything up for

sale must have a problem somewhere. Selling also conflicts

with the concept of status as based on accumulation, with

social prestige deriving in a significant sense from the quan-

tity – and, to an extent, the diversity – of assets held by an

individual or family.

The other principal challenge is a certain resistance to

change by the owners of family businesses. Family firms are

the status quo of business in the GCC, they are run by

established and entrenched management teams, and they

are usually profitable. Given this context, owners see little

reason to shake things up, and are not necessarily receptive

to the idea of doing so. This approach is also reinforced by



20

what makes us tick, then we can never consummate a

transaction, which is essentially a 3 to 5 year marriage”.

However, the simple fact is that, as outlined earlier, the

operating environment of GCC family businesses is

changing on an unprecedented scale, and will continue to

do so. If these businesses want to remain competitive, or

even remain operational, they need to recognise this and

fully embrace the cause of change.

This paper believes that running a family business

should be like running any other business, an idea that has

yet to be fully entrenched in the GCC mindset. Partnering

with a private equity firm can enable a family business in

the GCC to access truly global networks, implement inter-

national-class governance standards, successfully manage

succession issues, create management teams with a mean-

ingful stake in the success of the company, and benefit from

some of the most specialized and unique business expertise

available anywhere. Muhannad Qubbaj underlines that

sourcing this expertise can otherwise be problematic:

“Whilst firms can hire a whole array of consultants, this will

not be a centralised or consolidated approach. Consultants

come in, they do a project, you pay them and they leave. It’s

very different when you have someone who actually owns

equity in your company and has interests aligned 100 per

cent with the management and the shareholders”. Adding

these to any business should not be controversial. Business

owners also need to bear in mind that private equity firms

are excellent and seasoned risk assessors. If they express an

interest in partnering with a business, then that interest

functions as a barometer of overall business strength. It can

legitimately be taken as a compliment, if not an uncondi-

tional endorsement of everything connected to the firm and

the way it is run. The kernel of the matter is that this inter-

est will always be strongest when there is space for signifi-

cant value to be created, the unspoken implication of which

is that the business could be run better. Quite understand-

ably, this is a hard thing for any owner to accept. The con-

tention of this paper is that family business owners in the

GCC need to recognise that there is no such thing as a per-

fect business, there is no obvious limit to growth, and any

business – anywhere in the world – can always be improved.

The best way to derive prestige and fulfilment from a busi-

ness is for that business to be a successful one.

opportunity. They can also only be addressed by the fam-

ily firms themselves. The prognosis from more developed

markets that only 30 per cent of family businesses survive

into the second generation44, and less than six per cent

make a successful transition beyond the third generation45

should be a cause of profound concern. One suggestion is

for family business owners to familiarize themselves with

the first Ithmar Capital and Dow Jones white paper, The

Impact of Private Equity on the GCC 46, which gives an

insight into what private equity has consistently con-

tributed to businesses and economies the world over.

Owners should constantly be mindful that despite the

popular perception of private equity as synonymous with

short-term cost-cutting, the bulk of growth in private

equity-owned firms in fact derives from organic revenue

growth and acquisitions. It has also been shown that

employment levels remained the same, or even higher, at

exit versus entry in 80 per cent of US deals and 60 per

cent of European deals47. In addition, as Rabih Khoury

explains: “Target companies have to understand that they

will realize value only when private equity firms also real-

ize value, so alignment and a shared vision are key for suc-

cessful investments. If the target's shareholders only focus

on maximizing the front-end price rather than the price at

exit, there's a mismatch; private equity firms are essential-

ly long-term investors. This is one of the main issues we

face when we talk to local firms. If they can't understand


9%% 9%%

1%%

7%%

0

2

4

6

8

10%Average Annual Increase in Revenue (%)

Average Annual Increase in Employment (%)

FTSE Mid-250FTSE 100Private equity-backed

2%%

5%%

Source: BVCA

Figure 10: Comparative Sales& Revenue Growth



21


Increasing numbers of firms entering the GCC pri-

vate equity markets should be viewed as a positive devel-

opment. Competitive markets mean that the ultimate

difference-makers become strategic expertise and part-

nerships rather than simple access to capital. The con-

tention of this paper is therefore that private equity firms

in the GCC must operate as strategic entrepreneurs,

rather than as financial engineers. They need to function

as much more than a source of cash, not least because

this is one thing most family businesses in the region

have reasonable access to in any case. Instead, firms must

seek to leverage their expertise and access to market and

human capital networks, and to an extremely high

degree. Family businesses in the GCC already have these

to a certain extent; otherwise their companies would not

have successfully grown to the extent that they have.

Private equity firms must differentiate their expertise and

be sure that it can substantially supplement the skills and

knowledge already present within the business. As Jessica

Canning explains, “firms must be prepared to back up

their claims to add value. They must clearly show that

they are bringing something unique and exceptional that

could not come from within the company, or from any-

where else for that matter”.

Rabih Khoury expands on this theme, outlining that

“In the GCC, the value proposition of private equity

firms is not relevant if the only thing we offer is capital.

Family companies in the GCC are typically well capital-

ized with minimal debt, profitable, and they are reason-

ably good at what they do. There's enough capital in the

region, so capital is not the main driver of private equi-

ty transactions. Family companies have to believe that

private equity firms offer more value than just capital,

such as connections, synergies through existing portfolio

companies, access to markets, and access to people".

Abdulmohsen Al Touq continues, “it’s very impor-

tant that people understand there’s a difference between

the success of a company due to beta aspects and due to

alpha aspects. If I have a company and I introduce a pri-

Likewise, what kind of approach is required from

private equity investors if the full potential of the

GCC private equity opportunity is to be realized? The

most obvious consideration, and because of this perhaps

the least articulated, is that private equity firms must

recognise that success in the region will not come auto-

matically. The extraordinary amount of liquidity and the

continually quickening pace of privatizations and reforms

should not be allowed to blind investors to the fact that

there are a number of major obstacles which have yet to

be overcome. For example, whilst underdeveloped public

and M&A markets mean that private equity offers the

most viable exit route for family members looking to exit

their holdings, the same problem will then confront pri-

vate equity investors when they are themselves looking to

exit their investments. Investors must have a certain

degree of confidence that their holding period will coin-

cide with either a rapid improvement of local listing

opportunities, renewed regionally-focused M&A activity,

or both. Furthermore, as Abdulmohsen Al Touq under-

lines, “on a global scale, the GCC market is still relative-

ly small. People need to understand that before getting

into investing money in this geography. The geopolitical

risks are also not to be forgotten. One needs to understand

that if there are problems with geopolitics, or even with

commodity prices, it is going to affect the markets”.

It is absolutely vital for private equity firms to be

strictly methodical and assess opportunities according to

rigorous criteria which have a proven track record in

other, more established markets. Although this will not

eliminate the possibility of mistakes being made, and

some investors will, without doubt, align themselves bet-

ter with the market than others, this is not something

anyone should particularly fear. This is the way emerging

markets function, and for all the progress that has

unquestionably been made, the GCC is still an emerging

market. A certain level of trial and error is to be expect-

ed, and even welcomed as an essential element of market

development.

Approach Required

From Private Equity Firms



fessionals must also accept that there are outstanding

issues surrounding owner attitudes to loss of complete

business control and suspicion of outsiders, and also that

fully resolving them is largely beyond their powers alone.

Whilst they must do everything they can to meet the

concerns family business owners may have, ultimately

they can do little except set an example of excellent pro-

fessional practice and consistently deliver on their com-

mitments. Firms should also be aware that their existing

reputation and track record can also have a strong posi-

tive effect on the confidence of a potential family partner.

The issue is complicated by the fact that many busi-

ness owners are unaware of the private equity industry as

a whole and how to access it. An education process needs

to take place, with high-profile successful deals particular-

ly helpful here, especially as they also offer the further

possibility of creating a momentum of sorts in the region-

al private equity markets. The fact that awareness of the

industry is still sub-optimal amongst GCC family firms

can perhaps be seen as a function of the relatively slow

deal flow in the region, and this awareness should

improve as the market grows. Investors should also look

to leverage the influence of a company’s service providers

and advisors. As Phil Gandier explains, “if you look at

how private equity works in more developed markets, a

private equity fund will choose an advisor because that

advisor can give them a competitive edge. Although we

can’t share confidential information, they should be com-

ing to us for insights because we’re very much entrenched

in the market”. Relationships with the latter offer the fur-

ther advantage of gaining a better understanding of the

firm’s internal dynamics, as even local private equity firms

are almost always coming in cold to a certain degree.

In the end, private equity investors need to accept

that things like family businesses and networks and the

importance of self-fulfilment through business belong

not only to the past, but also the present and they are not

simply going to disappear. They are too significant a

component of the region’s cultural framework, and

indeed form part of the distinctive nature of the GCC

private equity opportunity itself. Ranjit Bhonsle outlines

how “any firm that can consistently assist companies

beyond the capital, that is to say transform them and put

vate equity player, and I move from being x to 2x, people

will think that’s good, but if you look at the underlying

economy it does the same thing, so they haven’t really

added anything. Only the good teams will definitely cre-

ate value. These will have a skill-set, professional manage-

ment teams, and professional structures and business

models that will create value in the underlying company”.

This is the principal challenge for any firm consider-

ing entry into the GCC market. However, it is by no

means the only consideration. Although private equity

investors bring highly specialized sector knowledge and

always seek to understand industry growth drivers as the

key to creating strategic value, this is made particularly

demanding when the firm in question, even after a

process of core asset focus has been undertaken, often

encompasses numerous unrelated sectors across intra-

regional markets. In addition, it is vital for international

firms in particular to be sensitive to the regional business

culture and the local mechanisms of doing business.

Strong personal relationships and chemistry with busi-

ness owners are the key drivers of negotiations and ulti-

mately any deals. The situation is summarized by Ranjit

Bhonsle, a partner at Ithmar Capital – “in the GCC

there’s a real reliance on trust and collaboration, and

deals cannot be looked at just as a commercial transac-

tion. There is an emotional aspect to it – it really is the

formation of a partnership and a certain spirit must

travel through the entire process. So you do need a high

level of awareness that you must, as a private equity

investor, evolve your mindset and the way you do a deal,

and accept some of the nuances of this market, be they

efficient or inefficient relative to the Western market” 48.

A negative corollary of this is that owners of companies

are often reluctant to accept a new partner whom they

have only recently met, and this is a concern when par-

ticularly sensitive matters such as exits are under discus-

sion. Proficiency in building such relationships is some-

thing which comes only from experience. One starting

point could perhaps be for investors to recognize that

whilst the goal of private equity is purely value creation,

this does not fully exhaust the motivations of family busi-

nesses owners in the GCC, who are as much driven by

prestige and self-fulfilment as profits. Private equity pro-


22



23

and the ability to find them partners, to develop them

and take them public. I think the family company will

still be a very strong sector in the economy, but they will

be teaming up more and more with private equity funds

because of the value they can create in their business”. In

other words, private equity firms who can do the basics

well whilst simultaneously moulding certain pre-existing

realities instead of attempting to create new ones will, in

the end, be the winners.

them on a new path to growth in a very short period of

time, will be able to sustain itself regardless of the

amount of capital that comes into the market, because

then you are investing on the basis of fundamentals and

what you as a firm can bring to transform the business” 49. As Phil Gandier adds: “Family-owned businesses are

so entrenched and they’ll never disappear, but I think

they will see the value that a private equity fund can add

– the expertise in management, the industry knowledge,


[23] 2006 American Community Survey , US Census Bureau, 2006.

[24] Focus on People and Migration, Office for National Statistics, June 2004.

[25] Entrepreneurial Finance for Job Creation in the Arab World: Elements

of a Strategy , American University of Beirut, 2005: Florence Eid.[26] 2006 World Population Data Sheet , Population ReferenceBureau, 2006.

[27] SME Ownership and Management Change: A Business Continuity and Development Perspective , Knowledge Management Centre,University of Central England, April 2000: Chris Martin.

[28] ‘Management Ownership and Corporate Value’, Managerial and Decision Economics , July-August 1993: Haiyang Chen, J. LawrenceHexter, Michael Y. Hu.

[29] TNI Market Insight: It’s a Family Affair , The National Investor, April 2007: Amer Halawi, Brian Davidson.

[30] TNI Market Insight: It’s a Family Affai r, op. cit.

[31] ‘Dubai Opens New Stock Exchange’, BBC.com, September 2005.

[32] ‘HSBC to Become First International Equity Brokerage in UAE’,Dow Jones Newswires , September 2007.

[33] ‘Outlook Bearish for Gulf Stocks’, International Herald Tribune , June 2006.

[34] ‘Family Business: It’s the Mindset that Must Change’, Arab News ,October 2007.

[35] Private Equity Insights I , Ithmar Capital and Dow Jones & Company,November 2007.

[36] ‘Emerging Market M&A Hits $663 Billion in ‘07, Beats ‘06’, Dow Jones Newswires , October 2007.

[37] ‘Emerging Market M&A Hits $663 Billion in ‘07, Beats ‘06’, op. cit.

[38] ‘A Gourmet’s Guide to Private Equity’, Management Today , January 2007: Andrew Wileman.

[39] Private Equity Insights I , op. cit.

[40] ‘London Business School Sets up in Dubai’, Gulf News ,December 2006.

[41] ‘Heriot-Watt University Begins Courses in Dubai’, Times of Oman,

August 2006.

[42] ‘Dubai Sets Up $10Bn Education Fund’, AlJazeera.net , May 2007.

[43] ‘A Gourmet’s Guide to Private Equity’, op. cit.

[44] ‘The Influence of Successor-Related Factors on the SuccessionProcess in Small and Medium Family-Sized Businesses’, op. cit.

[45] Capitalising on the Local Opportunities – Putting the Funds to Work ,op. cit.

[46] The Impact of Private Equity on the GCC , op. cit.

[47] How Do European Private Equity Investors Create Value? , op. cit.



[1] ‘Challenges Facing Family Companies in the Gulf Region’, Family Business Review , September 2000: John A. Davis, L. Elye Pitts, Keely Cormier.

[2] ‘Taking the Pulse of Family Business’, Business Week , February 2006:Stacy Perman.

[3] ‘UAE: Family Businesses Shun Initial Public Offering Spotlight’, Zawya, June 2006.

[4] ‘Family-Owned Conglomerates are in Urgent Need of Reform’,Emirates Today , April 2006.

[5] Major Trends Affecting Families in the Gulf Countries , UnitedNations, Division for Social Policy and Development, May 2003: Prof. Yahya El-Haddad.

[6] The Impact of Private Equity on the GCC , Ithmar Capital and Dow Jones & Company, June 2007: Nicholas Smith.

[7] How Do European Private Equity Investors Create Value? , Ernst & Young, 2006.

[8] A History of the Middle East (revised edition), August 2003: PeterMansfield.

[9] ‘The Influence of Successor-Related Factors on the SuccessionProcess in Small and Medium-Sized Family Businesses’, Family Business

Review , December 2005: E. Venter, C. Boshoff, G. Maas.[10] Capitalising on the Local Opportunities - Putting Funds to Work ,NBD Sana Capital, June 2007: Abrar Mir.

[11] Private Equity – The Rise of Desert Capitalism, Global InvestmentHouse, July 2006.

[12] From Compliance to Competitive Edge – New Thinking on Internal Control , Ernst & Young, April 2007.

[13] Gulf Investors Prefer Financials, See Corporate Governance as Critical ,HSBC Bank Middle East, April 2007.

[14] Gulf Investors Prefer Financials, See Corporate Governance as Critical ,op. cit.

[15] ‘GCC’s Overseas Acquisitions May Reach $50B in 2006’, Khaleej Times , October 2006.

[16] Corporate Governance in Middle East Private Equity Companies – Can It Add Value? , Gulf Capital Group, June 2007: Darren Smith.

[17] ‘A Legitimacy Crisis for the Saudi Leadership: The Royal Family Must Reform to Survive’, International Herald Tribune , June 2004.

[18] ‘Saudi Succession Follows Tradition’, AlJazeera.net , August 2005.

[19] The Family and Life Within It , Embassy of the State of Kuwait in Japan, 2000.

[20] Major Trends Affecting Families in the Gulf Countries , op. cit.

[21] ‘Socioeconomic Predictors of Unconstrained Child Growth inMuscat, Oman’, Eastern Mediterranean Health Journal , May 2004: A.J.Mohamed, A.W. Onyango, M. de Onis, N. Prakash, R.M. Mabry,D.H. Alasfoor.

[22] ‘Saudi Arabia’s Demographics – The Wind of Change’, AME Info,September 2006.



Case Study


Al Touq Company

W ith offices in Riyadh and Dubai, the Al Touq Company has been successfully making

local and international investments for over twenty years. The company’s holdings are

focused on five principal verticals, namely oil and gas, real estate, telecommunications, financial

services and infrastructure. As Abdulmohsen Al Touq, general manager of the Al Touq Company,

explains, the firm has recently streamlined its investment approach. “Our investing was always

done on an opportunistic basis, and was a function of the availability of funding and deal flow.

However, what we have done in the last two years is become more institutionalized. We have

identified an asset allocation model that we will adhere to. We identify key management teams

working in our verticals. In these verticals we then partner with a platform company which will

consolidate or develop some kind of roll-up strategy within that industry”. Mr. Al Touq gives the

example of a company in the energy sector – “we acquired the business and used it as a platform. It was a consolida-

tive from which we would then identify M&A activity or organic improvement of the company’s operation”.

This latter process followed a strongly defined course. “We worked closely with the management team to create

value for the underlying assets. This involves a lot of strategy building, financial support, networking, operational effi-

ciencies, and consultants we bring in from our family offices and also externally. We pay attention to the corporate

governance and also possible exits and realisations whenever possible. So we build all the way up”. Such a level of com-

mitment represents a response to an increasingly competitive operating environment for regional investors. “The level

of sophistication and exposure of investors and business owners alike is much higher than it was ten years ago.

Entrepreneurs today understand that you are not the only guy who wants to come and create value – they have expo-

sure to your competitors. Secondly, there is the liquidity factor. There is a lot of l iquidity – on a global scale, not only

in the Middle East – chasing a limited number of deals, which makes finding the best value difficult, regardless of

which side of the table you are on, seller or buyer”. There is also a third factor, which he identifies as the most impor-

tant of all. “The human resource, the intellectual capital – it is like gold dust. It is a scarce resource that everybody is

fighting for, and it is essential to the success of everything you are doing”. When asked why this resource is at such apremium in the region, he outlines several considerations. “The industry is recent in this part of the world, and the

expertise and training has only been there for the last few years. The end result will take some time for us to see. There

are also many players in this space, some with almost unlimited sums of capital, who make it more difficult and expen-

sive to hire people. The successful individuals or teams are probably already entrenched in a structure. They are work-

ing with successful family groups, they have relationships. Why would you rock the boat and leave? The same thing if

they are working for a financial institution or a fund – if they’re good, they are probably not available. Everybody wants

to hold on to what they have”.

Despite these challenges, Mr. Al Touq has little doubt that GCC family firms must engage with private equity – “in

the West and the more developed markets, you find the distinction between companies who have taken the route of stick-

ing to what they were doing – and now the wealth, or even the company, doesn’t exist anymore – versus the companies

who evolved and moved from being an entrepreneurial asset to a shareholding structure”. He sees a positive development

in the fact that “you now have younger owners and decision-makers who understand what it means to invite a private equi-ty investor compared to their fathers or principals. I think this is going to improve the overall industry going forward”, and

is confident that the GCC in general – and Saudi Arabia in particular – represent a sustainable operating environment for

private equity. He explains that “at the end of the day, the GCC market in its current form presents a very good opportu-

nity for successful management teams that operate in proper structures to create a lot of value. Saudi Arabia is the largest

of the GCC countries, and has even more potential in terms of bringing opportunities and creating value going forward,

due to the population size and the reforms which are happening in the macro and regulatory environment”.

In closing, Mr. Al Touq outlines a definite vision of how his company will be orientated against this background.

“We are positioning ourselves in our chosen markets to take advantage of the trends and opportunities that we think

we can possibly make money on or create value on. So we have strategically positioned ourselves with key manage-

ment teams in these verticals, and we strongly believe that if we do this the right way, and if we stick to our plan, in

the medium-term we will be identified as a strategic investor and a preferred partner to entrepreneurs”.

24

Abdulmohsen Al Touq,General Manager ofthe Al Touq Company



Case Study


Gul f Capi ta l

G ulf Capital was founded in May 2006, and has already become one of the region’s most

active private equity houses. Muhannad Qubbaj, Managing Director, Business

Development, outlines the firm’s strategy: “We look at brownfield GCC market leaders in the

fastest-growing sectors. We have over 250 shareholders comprising governmental institutions,

listed and unlisted corporations, ultra high-net-worth individuals and pension funds. Our share-

holders are our ambassadors, and at the same time our sources and introductions. I don’t like to

call them leads or deals – we call them partnership opportunities, because we try to really work

in full alignment with the management”.

Given such an approach, Mr. Qubbaj strongly emphasises the importance of personal chem-

istry when dealing with business owners: “To develop a relationship takes a very structured and

a very genuine approach to make it happen. It doesn’t happen overnight. It could take you three months or it can take

you a year and a half. There’s a revolving door in front of owners where people are coming in and out, and trust and

chemistry has to be developed – whether business happens or not. The more genuine the efforts are, the more effec-

tive the relationship will become in the future. People today are very smart. They understand if you are going to come

in just because you want some business out of them, or if you genuinely think you can add value together”.

One long-standing source of misalignment between investors and owners is the question of corporate governance

standards. However, Mr. Qubbaj adopts a positive outlook on this question: “I think practices are moving in the right

direction, even if they are not yet uniform across the region. The GCC countries are definitely committed – and will

continue to be committed – to becoming more investor-friendly. I would summarize it under recognition of the ben-

efits of institutionalisation. This is needed to retain local and regional capital, and at the same time to attract foreign

investment. We are seeing very positive changes, and in a year or so we will also see tangible results.”

Even if progress in this area is being achieved, Mr. Qubbaj explains that there nevertheless remain several obstacles

to successful private equity in the GCC: “The biggest hurdle here is apathy, and a lack of willingness to change.

Business owners have successfully created core competencies and focus areas, and they are not too comfortable aboutchange. They worked hard to build what they have now. However, the new generation moves a lot faster. What we do

is focus on families and their succession issues – in my view, the GCC opportunity lies in actually creating deals from

these situations, whilst always looking at growth sectors and industry trends”.

The other major issue relates to the market itself. “It’s becoming very competitive. There are anywhere between 80

to 90 firms focusing on the region, and they are chasing a finite number of deals. Perhaps liquidity is both a curse and

a blessing – a blessing because it fuels growth across all sectors, but a curse when it comes to valuations. Deals are over-

priced because you have 20 people – who don’t always think about intrinsic value – fighting for the same product”.

Summing up his thoughts, Mr. Qubbaj is in no doubt that private equity has a long-term future in the region,

and cites a growing international consensus on this point: “I just visited Hong Kong, where the Middle East in gen-

eral – and the GCC in particular – has become part of a new investment buzzword, which is ‘CHIME’. This refers

to China and the Middle East, and everyone is excited about what could be a new Silk Road. I think the region is

definitely going to offer sustainable and long-term operating advantages for private equity, and it’s quickly emergingas the fourth global hub after Europe, the US and Asia. Although it’s embryonic, it will move faster than other regions

because people are bringing real expertise, accepting trial and error, and applying best practices. The competition here

is really positive. Because you have a lot of money chasing very few deals, only the private equity firm which can

prove to the portfolio companies that they can add the most value – and create the bigger pie once they exit or go

public – will win the race”.

25

Muhannad Qubbaj,Managing Director,

Business Development



Case Study


Kanoo Group

T he Kanoo Group is one of the largest independent, family-owned business groups in the

Gulf region. Established in Bahrain in 1890, Kanoo is a diversified conglomerate covering

industries including shipping and freight, heavy machinery, travel, oil and gas, and insurance.

Mishal Kanoo, deputy chairman of the group, has an uncompromising view on how such busi-

nesses should be run: “I am convinced that successful companies have benevolent dictators as

leaders”. He expands on this theme, explaining that “the attribute of dictatorship I mean not in

the absolute manner, but rather in decision-making. One person needs to make the decisions.

They may be right or wrong, but at least a decision has been taken. I only know one company

who had democratic decision making at the senior management level. That was Eastman Kodak,

for a while. They faltered a hell of a lot because of that, because they were trying to get consen-

sus for everything and nobody was actually making the decisions. Hope upon hope, this dictator is also benevolent,

and he’s smart enough to allow others to have a say in how things are run. A democratic dictator is the worst thing

you could have. Name me one Fortune 500 company run like a democracy – I do not know one. They all have, at the

end of the day, a benevolent dictator”.

Mr. Kanoo sees no problem with finding space in such a business model for a private equity partnership: “Sure, of

course there’s space. But it does depend on the structure of the company, the intentions, and how all this is done”.

However, he advises investors to carefully focus their strategies. “There’s too much money in this part of the world.

But they can make a positive contribution in other ways. A large number of private equity companies here miss out

on the most important aspect of private equity, which is bringing managerial experience and knowledge. They can fix

these. It’s usually the case that a business is good, they just don’t know how to manage. What private equity should be

doing is saying ‘You’re doing great in this and that aspect and you know the business inside out. Now, here’s how to

fix the management’”.

He continues with this cautionary advice, stressing that “in this part of the world, there is one key element. It’s

not money, it’s not technical knowledge per se, it’s networking. If you are not connected you’ll go nowhere, irrespec-tive of how wonderful you otherwise are. It really is who you know that will open up opportunities for you. If I were

a private equity investor, that would be the first thing I would look at. At the moment you have a lot of people here

who will lend their names, but nothing else. So people can say ‘I’m attached to, or partners with, xyz’, but they won’t

get up and do anything for you. The investor here had better pay close attention to whom he is getting into bed with,

so to speak. You know the expression ‘coyote ugly’? You don’t want to wake up in the morning and wonder what you

were thinking”.

Mr. Kanoo outlines a particular issue confronting businesses operating in the growth GCC markets, namely access

to high-calibre human capital: “Finding good quality personnel at a reasonable price is a big problem. You can pay an

arm and a leg and still get someone who’s mediocre. The people who have quality know it, and are demanding high

prices. This is a very short-term vision, because if I hire you at such a price and the market takes a downturn, you’re

the first to go”. Nevertheless, with respect to the related issue of job creation and general economic growth, he remarks

that “private equity can make a contribution. As economists will tell you, they are great at creating jobs, even thoughmany of these will go to non-nationals. However, when these non-nationals come here they need to rent, they need to

eat, they need to travel, and so all of these things come back into the economy in an indirect manner. It’s great to make

money, but you have to make sure you give something back. You would otherwise be seen as a parasite, and parasites

don’t do very well”.

In summarizing his perspectives on the next 18 months for GCC businesses, Mr. Kanoo takes a similarly caution-

ary view: “There are three aspects to take into consideration. The background noise is the price of oil. That will seri-

ously affect all decision-makers and decisions in this part of the world. Secondly, there’s a trend towards a global slow-

down. If that happens, it will not have an immediate effect, because there’s still a lag between here and Europe and the

US. But when it catches up it will be a nasty thing to see. Thirdly, there’s the geopolitical situation which we have

absolutely no control over, and which affects the business cycle immediately. There’s no way for us, or anyone, to know

what’s going to happen there”.

26

Mishal Kanoo,Deputy Chairman,The Kanoo Group



27

• ‘HSBC to Become First International Equity Brokeragein UAE’, Dow Jones Newswires , September 2007.

• The Impact of Private Equity on the GCC , IthmarCapital and Dow Jones & Company, June 2007:Nicholas Smith.

• ‘The Influence of Successor-Related Factors on theSuccession Process in Small and Medium-Sized Family Businesses’, Family Business Review , December 2005: E.Venter, C. Boshoff, G. Maas.

• ‘A Legitimacy Crisis for the Saudi Leadership: TheRoyal Family Must Reform to Survive’, International Herald Tribune , June 2004.

• ‘London Business School Sets up in Dubai’, Gulf News ,December 2006.

• Major Trends Affecting Families in the Gulf Countries ,United Nations, Division for Social Policy andDevelopment, May 2003: Prof. Yahya El-Haddad.

• ‘Management Ownership and Corporate Value’, Managerial and Decision Economics , July-August 1993:Haiyang Chen, J. Lawrence Hexter, Michael Y. Hu.

• ‘Outlook Bearish for Gulf Stocks’, International Herald Tribune , June 2006.

• Private Equity Insights I , Ithmar Capital and Dow Jones& Company, November 2007.

• Private Equity – The Rise of Desert Capitalism, GlobalInvestment House, July 2006.

• ‘Saudi Arabia’s Demographics – The Wind of Change’, AME Info, September 2006.

• ‘Saudi Succession Follows Tradition’, AlJazeera.net , August 2005.

• SME Ownership and Management Change: A Business Continuity and Development Perspective , KnowledgeManagement Centre, University of Central England, April 2000: Chris Martin.

• ‘Socioeconomic Predictors of Unconstrained ChildGrowth in Muscat, Oman’, Eastern MediterraneanHealth Journal , May 2004: A.J. Mohamed, A.W.

Onyango, M. de Onis, N. Prakash, R.M. Mabry, D.H. Alasfoor.

• ‘Taking the Pulse of Family Business’, Business Week ,February 2006: Stacy Perman.

• TNI Market Insight: It’s a Family Affair , The NationalInvestor, April 2007: Amer Halawi, Brian Davidson.

• ‘UAE: Family Businesses Shun Initial Public OfferingSpotlight’, Zawya, June 2006.

• 2006 American Community Survey , US Census Bureau,2006.

• 2006 World Population Data Sheet , PopulationReference Bureau, 2006.

• Capitalising on the Local Opportunities – Putting Funds to Work , NBD Sana Capital, June 2007: Abrar Mir.

• ‘Challenges Facing Family Companies in the Gulf Region’, Family Business Review , September 2000: John A. Davis, L. Elye Pitts, Keely Cormier.

• Corporate Governance in Middle East Private Equity Companies – Can It Add Value? , Gulf Capital Group, June 2007: Darren Smith.

• ‘Dubai Opens New Stock Exchange’, BBC.com,September 2005.

• ‘Dubai Sets Up $10Bn Education Fund’, AlJazeera.net ,May 2007.

• ‘Emerging Market M&A Hits $663 Billion in ’07,Beats ‘06’, Dow Jones Newswires, October 2007.

• Entrepreneurial Finance for Job Creation in the ArabWorld: Elements of a Strategy , American University of Beirut, 2005: Florence Eid.

• ‘Family Business: It’s the Mindset that Must Change’, Arab News, October 2007.

• ‘Family Feuds – the Legacy of Poor Leadership’, Arabian

Business , July 2007: Mishal Kanoo.• The Family and Life Within It , Embassy of the State of

Kuwait in Japan, 2000.

• ‘Family-Owned Conglomerates are in Urgent Need of Reform’, Emirates Today , April 2006.

• Focus on People and Migration, Office for NationalStatistics, June 2004.

• From Compliance to Competitive Edge – New Thinking on Internal Control , Ernst & Young, April 2007.

• The Future of Family-Owned Business , Emirates Bank Group, June 2002: Suresh Kumar.

• ‘GCC’s Overseas Acquisitions May Reach $50B in

2006’, Khaleej Times , October 2006.• ‘A Gourmet’s Guide to Private Equity’, Management

Today , January 2007: Andrew Wileman.

• Gulf Investors Prefer Financials, See Corporate Governance as Critical , HSBC Bank Middle East, April 2007.

• ‘Heriot-Watt University Begins Courses in Dubai’,Times of Oman, August 2006.

• A History of the Middle East (revised edition), August2003: Peter Mansfield.

• How Do European Private Equity Investors Create Value? ,Ernst & Young, 2006.


Bibliography

impact of pe on gcc family businesses - 2008

Documents