MENA family businesses face specific growth challenges, shows Deloitte

05 February 2018

Growing families and a shifting economic dynamic in the Middle East are presenting new challenges to the region’s sizeable family-run businesses. Deloitte conducted a survey with some of the region’s most prominent family businesses to gauge their outlook moving forward.

Family businesses have provided much of the impetus for the economic development of the Middle East. But as families grow through the generations, so too the need for business growth for family enterprises if their expanding numbers are to enjoy the same returns they’ve been traditionally accustomed to. Complicating matters however are the changing economic conditions in the region, with a fall in oil prices and geopolitical uncertainty forcing local companies to adapt.

To find out what this means for the family businesses of the region, the Big Four advisory firm Deloitte undertook a survey with over 40 of the most prominent local family operators across a variety of sectors, seeking to determine key trends as to current approaches and future strategies for growth as well as internal matters uniquely specific to family businesses such as governance dynamics and leadership succession planning.

As to this latter point, the tendency for wealthy families of the Middle East to be relatively large, coupled with cultural issues particular to the region, can make for especially problematic transitions. While the survey found that 39.1% of family businesses have a formal succession plan in place, and a further 26.8% of respondents signaled that such plans are currently being prepared, 34.1% indicated that they do not have a plan in place – with the report noting that these were generally the smaller, less diversified families, who were more inclined towards making the decision “when the time was right.”

How frequently do you assess and review the strategic rationale of your capital/value allocation across the group

Growth Strategies

Of the 41 businesses surveyed in total, 19 identified as ‘very active’ in terms of managing their investments, with a further 13 labeling themselves ‘active’. (Just four of the remaining respondents considered themselves to be passive). Yet, when it comes to investment plans to drive growth, only a little over one half of respondents have enacted them formally – even though those who do not have formalised plans still consider investment as a key to their future direction.

Further, although the large majority of respondents believed themselves active or very active in their investment portfolio management, just 29% conducted a regular strategic review of their allocation of capital and value. While two of the 41 businesses conducted monthly reviews, and seven performed them quarterly, six of the organisations claimed that they never did so and another two said they were carried out only once every ten years despite the rapidly changing local economic landscape.

Business strategies likely to be a priority for your business over the next 12 months

Irregardless of this shifting business playing field in the Middle East, 63% of the survey respondents said they were confident of their local growth prospects in the short-to-medium term (with over a quarter ‘very confident’), citing various factors such as favourable demographics, infrastructure projects and prospects for diversification, the demand driven requirement for services, and underdevelopment in locations such Syria and Iraq which will provide ongoing opportunities. Further, the survey revealed that family businesses feel a strong sense of social and moral responsibility to continue to invest locally, as well as a desire to leave a positive, long-lasting legacy.

And disregarding the common lack of formalised investment plans among family enterprises, organic growth in existing markets was the most common response (at 26%) among a variety of intended business strategies for the coming twelve months (expansion by acquisition followed with 22%, while organic growth in new markets recorded 16%). At the other end of the scale were internal restructuring (10%), disposing of assets (9%), and introducing new products and services at just 5%.In which industry sectors do you expect to see most deal activity over the next 12-24 months

As to the sectors expected to attract the most interest, the pharma/biotech/healthcare industry led the way with 34%, followed by education (34%) and real estate/construction (29%), while energy resources (15%) and infrastructure (7%) were of waning interest. Of note here, the majority of responses as to the most popular investment sectors differed from the core operations of the respective businesses, highlighting, in the words of the authors, “the need for families to enhance their monitoring and measurement of both risk and return levels as they continue to diversify into new sectors.”

One such means for enhancement is in greater governance frameworks (along with establishing outright succession plans more generally), with clearer roles, policies and practices ensuring better oversight and a more robust decision-making process. Notably, less than 45% of the companies surveyed have to date established an independent investment committee, while some 53% of first-generation family-members remain involved in the business, and to some extent, in directorate roles.

Scott Whalan, Partner at Deloitte Middle East said; “As families continue to grow and the requirement for portfolio returns and dividends grow, ensuring a more structured approach to both new investments and the monitoring of existing investments becomes paramount. The active management of both risk and return of their business will help families more effectively adapt to both external market forces and their own complex internal dynamics.


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Oxford Business Group appoints new directors for Bahrain and Oman

21 March 2019

Global research consultancy Oxford Business Group has installed a new leadership team for its operations in Oman and Bahrain.

To support the production of its forthcoming country 2020 reports on Oman and Bahrain, global research consultancy Oxford Business Group (OBG) has appointed new leaders in each, with former Oman Project Manager Sarah Crompton-Donnelly appointed as Country Director for Bahrain, and Naiade Freitas crossing from OBG’s Myanmar branch to take over in Oman.

A former Oil & Gas advisory services consultant with PwC in Mexico, Freitas joined OBG in 2017 following a three year stint as a business consultant with IT professional services firm Everis in Brazil – where among other activities she helped to develop its Lean Six Sigma training programme. Earlier, Freitas worked as an account executive at Neilson, and holds a degree in international relations.

Noting the IMF’s current 5% economic growth forecast for Oman, OBG Middle East Managing Director Jana Treeck said, “With business confidence high, investors will undoubtedly be keen to discover more about the openings in evolving sectors of the sultanate’s economy, such as mining, tourism and manufacturing. I’m sure Naiade will do an excellent job of unearthing these myriad opportunities and relaying them to our readers.”Oxford Business Group appoints new directors for Oman and Bahrain Meanwhile in Manama, Sarah Crompton-Donnelly has stepped up to the Country Director role in Bahrain after serving as an OBG project manager in Oman for the previous six months. An MA graduate from the University of Edinburgh, Crompton-Donnelly was previously a project coordinator for Istanbul-based Global Business Reports, working in Europe, North America and Asia.

“Sarah has already shown herself to be highly knowledgeable when it comes to emerging markets, while her recent spell in Oman has given her additional insight into the workings of GCC economies. I’m sure that this on-the-ground experience, combined with her evident enthusiasm, will stand her in good stead as she takes up this new opportunity,” said Treeck.

With respect to OBG’s upcoming Bahrain 2020 report, which covers a range of economic development factors and local investment opportunities, Treeck continued, “These are exciting days for Bahrain, with its efforts to diversify the national economy and attract new investment for its public-private-partnership projects now accelerating, against a backdrop of key reforms.”

With a focus on emerging economies, OBG in addition to Oman and Bahrain compiles comprehensive country reports on Turkey, Saudi Arabia, Jordan, Kuwait, Qatar, and the individual emirates of the UAE, among some 40 countries covered across Africa, Asia, the Americas and Middle East. Together with its local bureaus, OBG also has primary offices in Istanbul and Dubai.