Q) You began your career in private equity just before the global financial crisis began taking hold in the Middle East. How has the economic outlook changed since then?
Before the crisis, there was a lot of liquidity in the region, primarily driven by government spending, large and long-established wealthy families who dominate the regional conglomerates, and an influx of foreign investors looking to capture part of the explosive growth the region was experiencing. Private equity started making its way during that surge, but what you found were countless funds setting up, that lacked discipline, conventional approach, and professionalism often followed in the US and Europe. Many of these new firms were very “raw” and unfocused, whether during conducting diligence or when managing their portfolios.
Then came the crisis, and it had a clear and heavy impact on this part of the world. The real estate crisis was well-documented, people were leaving the country, and the effect was visible in all aspects of day-to-day life. The real outcome of such was weeding out the “undisciplined” fund managers, leaving the truly institutionalized and well-capitalized to survive. It is interesting to see how over the past year-and-a-half the GCC, and primarily UAE, economies have rebounded and private equity investment opportunities have come roaring back with a more sound approach to investing. There still are the outliers, but not to the degree seen during the pre-crisis era.
Q) What is the greatest challenge someone faces when investing in the Middle Eastern market today?
One of the biggest challenges this market faces is identifying attractive targets whose shareholders are willing to sell down. Different than other markets, liquidity is not what is scarce in the GCC. What poses the biggest challenge is finding attractive, well-run opportunities that are scalable in the region and beyond, and with owners who are willing to part from their companies. Given that family-owned assets dominate the marketplace here—families that have owned and operated those businesses for generations—this creates one of the biggest challenges we face in getting a family comfortable with a new ownership and management structure. It is simply something new to them, and consequently you will have to demonstrate the value-add that you bring to the table and walk them along every step of the process.
Another major regional challenge is finding a committed and experienced management since 89% of the population in the UAE is expat-based, and the truly talented are with the large government entities and corporates, earning large and attractive packages. It is a challenge getting such individuals to part from such lucrative packages in order to join a smaller setup with the promise of a carrot over time. You overcome such obstacles by attracting personnel that share your vision and dream of becoming part of the growth of a company, while realizing the proceeds that come with it. So you build a comprehensive, complimentary team that shares the same values and strives toward the same vision. Offer them the right incentive scheme via equity, and ensure that all incentives are aligned.
Q) From an investment standpoint, what do you see as some of the up-and-coming industries in the region?
Construction is coming back now that recovery from the financial crisis has taken hold. Dubai has specifically seen rapid growth in the past months after being selected to host the World Expo trade convention in 2020. The building of new exposition centers and improvements to the underlying infrastructure is well underway, from new cities to a railway system that spans the country. Defensive sectors will always remain attractive, such as healthcare and education, with the strong population growth in the country. Those industries are nothing new, however. They are simply making a comeback since the crisis.
A new and interesting industry that is making a strong entrance is e-commerce. Years ago, regional alternatives to sites like Amazon, eBay, Cars.com and craigslist didn’t exist in the region. More recently however, sites like Souq, Dubizzle, and Namashi.com have taken off and even received attention from sophisticated debt and equity investors in the U.S. and Europe. They are attracting a lot of investors from the region as well as San Francisco. Internet penetration in the country is close to 90%, with similar levels in larger neighboring economies, such as Saudi Arabia. In my opinion, there is a huge potential for e-commerce and the underlying e-services over the next few years, and you want to make sure you get in on it early.
Q) What do you know now that you wish you had learned earlier in your career?
If attending business school, ideally you go into it knowing what you want to do or at least having it narrowed down to a few things that have piqued your interest. You would then leverage your business school experience and network to pursue one or more of those things. When I first started at Fuqua, I knew I wanted to pursue a career in finance, but spent too much time going through all of my options, to a point where I’d often find myself flustered and intimidated. Fortunately, I landed my internship early on and later received a full-time offer. To play devil’s advocate however, business school also opens a lot of doors. Therefore one shouldn’t be too married to one sector or job, and one should let his or her interest be the guide.
Q) What advice would you give to someone who aspires to work in the Middle East?
The region can use an additional pool of talent. Most large international consulting, financial services, and blue chip corporations have a presence in the region. From the first moment you have a clear interest in the region, position yourself to pursue jobs here. Define your interests in the region. What is it that attracts you here? When you meet with recruiters show primary and genuine interest in the Middle East and don’t present it as a backup option. Make sure you visit and can draw from your experiences. Make sure to reach out to your network for insight and take up any leads they may present you with.
Additionally, try to gain professional experience in the Middle East, through an internship or a class offering. Gain an experience that builds your story and credibility, and that puts you ahead of the pack.