Public markets fail to interest families


Middle East family businesses show little interest in taking their business public, despite increasingly active stock markets in the region that are hungry for new listings, says a senior banker.

Fathi Ben Grira, CEO of Menacorp, an Abu Dhabi-based corporate financial group, says the enticements to list are just not there for most family businesses. “You can’t take the same metrics in other parts of the world and use it to look at the Middle East. For the most part, families aren’t interested in listing their business,” he says.

That’s despite the fact that regional stock markets are looking to expand. Recently, the Saudi stock market, known as the Tadawul, allowed foreign capital access for the first time. And with a fair share of resource-based cash sloshing around the Middle East, the region’s stock markets, particularly among the Gulf Cooperation Council countries, are very liquid.

Tax reasons often provide the sweetener towards a family business listing in say Europe and North America, but in the Middle East there isn’t any incentive here because their isn’t any tax, says Ben Grira. “Also, the listing restrictions are putting off families. The rules in most of the Gulf Cooperation Council countries are quite tough. In many cases you have to list up to 55% of the business. Although that is changing, most families don’t want to give up majority ownership.”

Issues over transparency also irk many regional family businesses, says Ben Grira. “All the families know each other and once you’ve listed your business everyone has access to all your financials. Few families want that.” And governance issues that may be viewed as being better addressed by a public listing are improving anyway. One of the ways families are doing this, says Ben Grira, is bringing in more non-family professionals at senior levels. He mentioned Al Habtoor Group and Majid Al Futtaim Group in Dubai as recent examples of family businesses that have brought in external CEOs for the first time. “Such moves help to increase the professionalism of the business and improve governance,” says Ben Grira.

The banker adds that access to finance for family businesses is pretty easy anyway through low interest rate borrowing. “When you can borrow at 2% why would you go for an initial public offering when you can get money that cheap. Banks are big competitors to IPOs.”

Nevertheless, some Middle East families still see the appeal of the market. Family Capital recently interviewed Ghassan Nuqul of the Nuqul group about his ambitions to list the family business in the next few years. Ben Grira said that some families are looking towards listings as they move from one generation to the next. “A listing looks more tempting when there is more mouths to feed,” he says.


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