Private UAE companies look more favourably on asset sales

26 February 2014

Family business leaders’ attitudes towards asset disposals are changing

Asset sales by UAE-based family businesses are becoming less rare as business leaders view the deals more positively, according to Khaled Sifri, CEO of Dubai-based Emirates Investment Bank.

“In the UAE, privately owned companies have been less culturally inclined to conduct transactions, but I think that’s changing,” he says.

The country’s major family businesses usually invest in a variety of sectors, taking on the role of an incubator or venture capitalist as owners hope the businesses will grow. The unsuccessful units traditionally ended up being closed down as opposed to being nurtured and sold off. That attitude is changing as entrepreneurs see value in selling assets that do not have synergies with the core business model, however.

“It used to be that disposing of an asset was something families resisted because they felt it gave the impression it looked like being in need of some sort,” says Sifri. “Many are now beginning to appreciate those transactions are not a reflection on their own status, but rather stem from a transactional need or that the asset may not be a good fit for their position.”

While Saudi Arabia and Kuwait typically lead in terms of mergers and acquisitions (M&A) deal volume, Sifri expects participation from UAE businesses as well.

“We know [GCC] family businesses are doing more transactions,” he says. “We have engagements in some – they’re more likely to be interested in being on the buy side but there are times they will be on the sell side. Going forward, we have engagements in sectors such as retail, automotive, healthcare and food.”

One of the deals Emirates Investment Bank is about to finalise is a major UAE family acquiring an automotive business in Saudi Arabia and Egypt.

Sifri also says private companies are increasingly exploring options to sell shares to the public.

The lender is currently preparing two companies for potential initial public offerings (IPOs), and Sifri has “conversations with other [firms] on a pretty regular basis” to determine if going public will suit their business needs.

“As markets become increasingly active and investor confidence rises, raising capital becomes a more popular option,” he says. “During the period when we saw a lack of confidence, businesses were still screaming for all sorts of funding. But because the appetite was not there, you would see little activity in that regard. Now investors are willing to take more risk.”

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