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Maheur Mourali, Executive Director of Investment Banking at Swicorp, gives an insight on the Saudi Arabian M & A market

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June 23th 2016, Angermann-Inpuncto

Your firm is an experienced advisor when it comes to M&A in the Gulf States. Please tell us: When was your firm founded and with what aims? What has changed since its beginnings?
Kamel Lazaar’s first intention when founding Swicorp in 1987 was to assist very close friends of his in Saudi Arabia, friends he had made while working at Citibank years earlier. With very strong bonds established and a country offering so many opportunities, the choice was easily made. After 30 years in the Middle East, Swicorp today lives up to its an unshakable commitment to the development of the region. The company is much more established with over 30 professionals in M&A, Private Equity and Asset management in offices in Jeddah, Riyadh, Dubai, Geneva, Tunis and since recently in Johannesburg. Over the years the company has succeeded in positioning itself as a leader in the region with roughly 5 M&A deals closed per year, covering all sectors from healthcare to food & beverage. At the same time we have developed a track record in structuring real estate projects with key collaborations spanning across the soil of Saudi Arabia and raising tens of billions both in debt and equity.

 

This year the the price of oil fell to its lowest level since 2003. Both the global oversupply and the slow-down of China’s economy have repeatedly been identified as causes for this development. After the Iran sanctions have been lifted, this decline could even accelerate as more oil is literally pouring into the market. How does Saudi Arabia cope with this situation, particularly taking into consideration that approx. 3/4 of government revenues are based on the oil industry?
This year has indeed been marked by a sharp reduction of the oil price. The low prices have caused a profound shockwave across the world. The Saudi government has however swiftly considered this situation and shortly afterwards put in place a few measures to tackle this challenge. This year’s budget has been based on an extremely low oil price, a few subsidies have since been partly lifted and new fiscal policies have been put in place to reduce similar systemic impacts. In addition, Mohammed bin Salman Al Saud, Deputy Crown Prince and Deputy Prime Minister, has launched a new initiative called “National Transformation Plan” with the objective to reduce oil dependency and to increase revenues from other sources. Saudi Arabia remains custodian of the two holy mosques of Medina and Mecca, which translates into millions of pilgrims flying into the country every year. The country still holds plenty of mineral resources (phosphate, aluminum, iron). To name a few more examples among many others: Saudi Arabia is positioning itself to expand its role as a trading hub. Investments are made in infrastructure, education, and alternative sources of energy that clearly show the government’s intention to reduce what is perceived as a dependence on oil.

 

Prince Mohammed bin Salman Al Saud said recently “The Saudi Arabia that I hope for: a Saudi Arabia that is not dependent on oil.” Given today’s structure, this is certainly a major challenge for the years to come. In which economic sectors do you see the main opportunities of this development? Is Swicorp focused on these or other industries?
Saudi Arabia’s Deputy Crown Price has repeatedly expressed his intent to transform the country’s economy. With new reforms and new guidelines paired with key performance indicators, Prince Mohammed bin Salman Al Saud has surrounded himself with all minds capable of contributing to the discussion revolving around Saudi Arabia’s economic future and prosperity. At Swicorp we do understand your opinion that viewed from the outside it may be seen as a major challenge. Nonetheless, having been part of the country’s evolution for the past few decades, we know that Saudi Arabia has the means to transform. With sound investments in infrastructure, liberalization of ownership and a reduction of its remittance of money spent, Saudi Arabia has a clear shot at fulfilling such a promise. At Swicorp we have never been strictly sector specific. Instead, we have developed an in-house working culture that is well geared to tackle the different needs of the region. We have indeed well positioned ourselves to cater to the upcoming needs of the region and consider ourselves blessed that we have made the choice of having such focus since the company’s inception.

 

Viewed from the outside, Saudi Arabia is still considered to be relatively conservative and strict. However, it is also recognized as the Arabic country with most Twitter users. As taking an active part in social media could be seen as an indicator of an opening society, we are interested in your opinion: Is there cultural change afoot?
It is indeed factually correct that Saudi Arabia has a very high usage of online social media in comparison to other Arabic countries. Not only are Saudis present on Twitter, but very much so on Facebook and YouTube for example. What should come out of such analysis is that Saudis are very open to advancements in technology. E-commerces are strong platforms that will greatly benefit from such recent developments. For these reasons, internet platforms such as Rocket internet are very keen on increasing their position in the region. Talabat, a food delivery website heavily involved in Saudi Arabia was recently acquired for no less than USD 170 million.

 

Twitter is meant to support people in connecting with others and also fostering business relationships. A similar goal iscalled out by M&A International, Inc. This is certainly emphasized by the fact that its most recent conference was held in Dubai. When and why did you join MAI? How important is it for your firm today?
Swicorp joined MAI in 2008. Adhering to the alliance was a palpable choice. Thanks to MAI Swicorp has access to over 44 countries and the know-how and expertise of more than 650 colleagues. Beyond the evident benefits of working in collaboration with the leading bank members of MAI, we understand at Swicorp that the Middle East and North Africa will grow in joint ventures and in investments outside the region through the growing presence of sovereign wealth funds (for example, Saudi Arabia announced an USD two trillion fund). All this makes this alliance especially interesting to us.

 

State-owned Saudi Aramco, the largest oil company in the world that extracts as much as Exxon Mobil, BP and Royal Dutch Shell combined, is about to go public. There are speculations that the company is worth hundreds of billions of dollars. How is this issue currently being discussed in your country?
Saudi Aramco is a source of national pride as the company ranks among the largest companies in the world using state-of-the-art technology and being run by Saudis. Since the announcement by Prince Mohammed bin Salman Al Saud, there has been speculation about Aramco’s IPO in regards to the size, the assets included and the listing place. We understand the purpose of this listing is to provide more transparency. It is also perceived as an opportunity to share even more of this success with the Saudi nationals.

 

Although Germany has never been a serious oil producing country, German firms have been doing business with Saudi Arabia for more than 60 years. Is there anything that German companies are popular for in your country? And what is important for them to know if they consider investing in Saudi Arabia?
German companies are present in Saudi Arabia in several sectors: automotive, publishing, industrial equipment and industrial engineering. German services and equipment are highly in demand for their perceived reliance. To relate an anecdote: We once worked on a very large greenfield project where the governmental fund explicitly requested German equipment to be used as a prerequisite for providing financing. Saudi Arabia is keen on shifting from a net importer to a manufacturer which is exactly where we believe German companies may find tremendous opportunities by partnering with local companies.

 

Given that Saudi Arabia is currently facing economic challenges and taking into consideration the announced start of a structural change process, are there specific sectors that Saudi companies are looking to when acquiring targets abroad?
Due to recent global events that played a certain role in the recent announcements in Saudi Arabia, we today witness a greater demand for expansion beyond the region. In M&A we certainly see a keen appetite as investments abroad are considered more often. Bear in mind that Saudis have grown to an impressive level of astuteness and sophistication in business that distinguishes them from certain investors that are considered strictly for their deep pockets. Interests to either improve the position of their existing business and/or to diversify are contemplated. As a result of the recent conference in Dubai, interests range from real estate, industrial goods, hospitality & healthcare tofood & beverage, which may be perceived as excellent defensive plays to tackle the current economic challenges perceived worldwide.

 

We are doing business in a globalizedworld. Most have already figured out how to speak another language. However, many people are struggling when they have to deal with cultural differences. As an M&A consultant, how do you cope with that kind of issues? And, for instance, how were your experiences when working with your MAI partners in this kind of situations?
Mainly due to its history, Swicorp has from an early phase on adopted the region’s culture and embedded itself in it with Swiss standards of best practice, rigor and discipline. Swicorp has consistently counted on its diverse and multicultural team to bridge differences. Within MAI, cooperation has been very easy. We have enjoyed prompt and smooth exchanges for cross-border opportunities that have translated into an increased number of closed deals. One has to understand that certain mandates can be perceived as extremely complex in their structure and also due to different geographies with different cultures. When certain firms would give up finding solutions, at MAI with the collaboration of our partners, we have managed to go over multiple strategies and angles as creative as they can be to fulfill our clients’ needs.

 

Link to the article : http://www.angermann-inpuncto.de/unser-mai-team-in-saudi-arabien-swicorp/

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Executive Director Andre Wagner on Africa and its untapped opportunities

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Andre Wagner joined SWICORP in 2004 as part of the investment banking team covering the MENA region. He then moved to the private equity division in 2011 where he now holds the position of Executive Director – Private Equity.

He is a member of the Investment Committee of SWICORP Intaj, a MENA focused private equity fund focusing on consumer driven technologies.

Andre’s other positions include:

    • Board Member of Luminus Group (Education, Jordan)
    • Fitness One (Wellness, Jordan)
    • Venezia (F&B, Morocco)
    • California Gym (Wellness, Tunisia)

In a recent interview in the prelude to his speaking engagement at the African Investments Meeting 2016, Andre shared his thoughts on African investments and its untapped opportunities.

Despite numerous reports highlighting Africa’s strong investment potential, why do you believe Middle Eastern investors are slow to enter the market?

I don’t necessarily agree that Middle Eastern investors have been slow. In fact, Middle Eastern companies have been looking and investing in Africa for decades. However, it is true that the volume of investments will tend to increase in the coming years as Middle Eastern investors seek to further diversity their portfolio geographically, particularly into high-growth markets such as Africa.

 

Has the current economic downturn caused by the oil and gas sector influenced your investment mandate in 2016? If yes, how?

Yes, in the sense that regional instability caused by the oil and gas sector has acted as a catalyst for Middle Eastern investors to seek geographic diversification. Therefore, although liquidity may have reduced, we do expect to see increasing interest for investment products that can provide high growth and diversification benefits.

 

Why do you believe Africa represents a strong investment opportunity?

GDP growth across the region has led to the rapid development of an urban well-educated middle-class that drives progress in all spheres of life including healthcare, education, but also politics and better governance. As a consequence, not only has GDP growth generated attractive returns, but the risk associated with investing in Africa has decreased substantially over time with improved economic and political stability. The combination of both factors means that the risk-adjusted return that one can obtain by investing in Africa has improved significantly in recent years.

 

Which sectors represent the best investment opportunities in Africa?

Industrialization is likely to become a recurring theme as African economies graduate from a heavy reliance on agriculture and commodities towards more diversified economies. We believe that sectors that are somehow related to the industrialization ecosystem will tend to do particularly well. These include manufacturing, processing and industrial services but also healthcare and education as more industrious societies will drive demand of highly qualified jobs.

 

What are the biggest challenges faced by Middle East investors in sourcing African investment opportunities?

Key challenges faced in Africa are not that different from the ones faced elsewhere: finding the right partner, the right industry and the right company to invest in. Availability of information, currency risk, political risk and weak regulatory frameworks are challenges maybe more pronounced in Africa than in more development economies

____________________________________________

About the meeting

The African Investments Meeting 2016 is taking place on March 21st 2016 at the Grosvenor House Hotel Dubai.

Designed to introduce Gulf-based investors to African business cases, the meeting also features two exclusive expert panels featuring leading investors who will share their experience and case studies on investing in Africa and capitalising on its near untapped potential.

To know more about the meeting, visit the meeting page.

Alternatively you can contact:

Diana Jones
Project Lead
T: +971 44 55 79 56
E: Dianaj@naseba.com

– See more at: http://www.investorintro.naseba.com/andre-wagner-of-swicorp-on-africa-and-its-untapped-opportunities/#sthash.tDdsJJ6t.dpuf

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مارس 2016 – الرياض – مقابلة مع ماهر المورالي، المدير التنفيذي للخدمات المصرفية الاستثمارية: اقتصادات دول الخليج لا تزال معرضة لمخاطر التذبذب في أسعار النفط

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 قالت شركة مالية عالمية متخصصة في إدارة الأصول واستثمارات الملكية الخاصة أن اقتصادات دول مجلس التعاون الخليجي لاتزال معرضة لمخاطر التذبذب في أسعار النفط بغض النظر عن برامج التنويع الاقتصادي، غير أنها أكدت في الوقت نفسه على أن اقتصادات دول الخليج والسعودية على وجه الخصوص تتمتع بوجود وفورات واحتياطيات نقدية تساعدها على مواجهة الوضع الراهن.

وأكدت شركة «سويكورب» على لسان مديرها التنفيذي للخدمات المصرفية الاستثمارية ماهر المورالي أن الانخفاضات الحادة في أسعار النفط أدت إلى حدوث عجز في موازنات دول الخليج، ونتج عنها اتخاذ عدة تدابير من ضمنها رفع الدعم وبرامج تحسين الكفاءة والأداء، وتأثرت نتيجة لذلك القطاعات الأكثر اعتماداً على الإنفاق الحكومي مثل الإنشاءات ومواد البناء.

وحول تأثير التطورات الأخيرة في أسعار النفط على سوق الاندماج والاستحواذ في المملكة قال المورالي ل”الرياض” إنه بغض النظر عن بعض الحذر القائم لدى عدد من الشركات السعودية، لكن الملاحظ وجود طلب قوي على الفرص الاستثمارية من أهم الشركات مدعومة بثقتها في أساسيات الاقتصاد السعودي والرغبة في تعزيز مواقعها القيادية في السوق، مبيناً أن منطقة الخليج لاتزال جاذبة للاستثمارات الأجنبية، كما تتوفر فرص كبيرة للشركات السعودية للتوسع خارجياً مدعومة من الرغبة في اكتساب المعرفة وتنويع مصادر الدخل.

وأكد أن الطلب يرتكز على القطاعات الاستهلاكية مثل التجزئة والرعاية الصحية والتعليم، في حين أن بعض القطاعات مثل الإنشاءات ومواد البناء تواجه ضعفاً في الطلب نظراً لارتباطها بعقود مع القطاع العام، موضحاً أن التصحيح الحاصل مؤخراً على مؤشر سوق الأسهم السعودي قد أثر على مستوى التقييمات المالية للشركات الخاصة نظراً لاستخدام مكررات ربحية سوق الأسهم كأداة لتقييم الشركات الخاصة غير المدرجة؛ حيث ساهم ذلك في خفض الأسعار المتوقعة لصفقات الاندماج والاستحواذ من جانب البائع وجذب المشتري من ناحية أخرى.

وأضاف “يشهد سوق الاندماج والاستحواذ تسجيل نمو مطرد منذ عام 2011، وفي المملكة تنشط هذه الصفقات بين المنشآت السعودية مع وجود عدد قليل من الصفقات الدولية”.

وحول القطاعات المثلى للاستثمار الآمن في المنطقة أكد أن الاقتصاد السعودي يشهد حالياً طلباً قوياً على القطاعات ذات الطابع الاستهلاكي أو ما يسمى بالقطاعات الدفاعية مثل الرعاية الصحية، والتعليم، والتجزئة، والأغذية، مشيراً إلى أن العديد من الشركات العائلية والمجموعات السعودية الضخمة وشركات الملكية الخاصة بدأت التركيز على هذ القطاعات؛ حيث يؤثر هذا الزخم على التقييم نظراً لقلة الفرص في السوق.

وفيما يتعلق بأداء سوق الأسهم السعودية شدد المورالي على أن أسواق الخليج بشكل عام وسوق المملكة بشكل خاص قد سجلت تصحيحاً كبيراً خلال الأشهر القليلة الماضية، ورغم ذلك نحن واثقون من متانة الاقتصاد السعودي مدعوماً من قبل النمو الديموغرافي، والطلب المحلي القوي، والقوة الشرائية المرتفعة، كما نعتقد أن التصحيح جزء من الدورة الاقتصادية، ونعتبره فرصة للاستثمار مع توقعنا بالتعافي خلال الأشهر القليلة المقبلة.

وبينّ أن سوق الأسهم السعودي يعدّ من بين أهم أسواق المال في منطقة الشرق الأوسط وشمال أفريقيا وأكثرها تطوراً، لكنه شدد على أن السوق بحاجة إلى الكثير من التطوير واتخاذ عدد من القرارات أبرزها زيادة عدد وتنويع الشركات المدرجة من خلال تطوير مؤشر خاص لكل قطاع؛ حيث من الممكن القيام بمنح الشركات بعض الحوافز، إلى جانب تطوير الإدراج المزدوج مع واحد من الأسواق العالمية، تحسين مستوى الإفصاح المالي من قبل الشركات المدرجة بحيث لا تكون محددة بالإفصاحات النظامية، وأن تشتمل على تحديثات دورية عن إستراتيجية الشركة، إدراج السوق السعودي في واحد من مؤشرات الأسواق الناشئة؛ حيث من المتوقع أن يتم ذلك في عام 2017 أو 2018.

http://www.alriyadh.com/1136256

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Interview @ARAB NEWS: “Investment banking: Kingdom offers attractive opportunities”

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file-12-Swicorp

The Saudi market will remain Swicorp’s most important focus in view of the tremendous attractions and opportunities in the Kingdom, says a top management executive.
Investment banking will look to continue the growth of its corporate finance advisory business, including in mega real estate and advisory projects, in the Kingdom and also in the rest of the Middle East and North Africa (MENA) region, Daniel Schenker, CEO, Swicorp, told Arab News in an exclusive interview.
It is in this context that Swicorp has been highly active right across the Kingdom and elsewhere in the MENA region with a track record of transactions across the Gulf, North Africa, Egypt, Turkey and the Levant, he said.
Giving an overview of Swicorp, he said it is a major investment banking, private equity and asset management firm with a specific regional focus on the MENA.
From its headquarters in Riyadh and regional offices in Jeddah, Geneva, Tunis and Dubai, Swicorp provides corporations and investors with independent advice and assistance on key strategic financial and investment issues.
Founded in 1987 by current Chairman Kamel Lazaar and licensed by the Saudi Capital Market Authority and the Dubai Financial Services Authority of the UAE, Swicorp today has grown to be one of the region’s premier financial services providers, he says.
In fact, Swicorp has an extensive track record of over 27 years of pioneering mergers and acquisitions, advisory and real estate transactions across MENA for regional and international clients.
It also has developed into one of the major players in the private equity sector in MENA, raising over $1 billion in private equity funds since 2005.

These are highlights of the interview:

Do you exclusively focus on the Saudi market, or are you similarly interested in other foreign markets?
The Saudi market has historically been and will remain Swicorp’s most important focus.
This is in view of the tremendous attractions and opportunities of the market in the Kingdom.
However, Swicorp has also been highly active right across the MENA region, with a track record of transactions in North Africa, Egypt, Turkey and the Levant, and across the Gulf.
These regional capabilities are reflected by the presence of dedicated staff located in strategic areas in offices across the Gulf and North Africa.
While we do not intend to stray too far from our primary geographic focus, we are also assessing opportunities to develop a presence in adjacent emerging markets such as sub-Saharan Africa where we may leverage our knowledge, expertise and network for the benefit of our valued clients and investors.

What are your plans and strategy targets for 2015?
Swicorp is driven by the desire to leverage its financial and intellectual capital to help our clients and investors realize their objectives.
We know that if we succeed in this aim, Swicorp will also be successful.
We believe that Swicorp has built a special, indeed, unique platform in MENA and, over the past two years, all our businesses have grown stronger. The core blocks that will drive future growth are already largely in place and established.
In summary these are as follows:
Investment banking will look to continue the growth of its corporate finance advisory business, including  in mega real estate and advisory projects, an area where Swicorp has established clear market leadership.
Private equity will look to grow the ‘syndicated private equity’ activity as well as sourcing and structuring initiatives to develop new private equity funds with a specific geographic or sector focus Swicorp will look to expand its asset management activities by developing new products and increasing the level of assets under management, both in the listed equities sector and also the increasingly important real estate funds activity.
We continuously look for additional opportunities to grow and diversify our activities by leveraging our strong platform in the Middle East and North Africa (MENA).
Partnerships or joint ventures can therefore come under consideration if the right combination of market needs, expertise and skills can be found.

Which areas are the most vibrant for your projects in Saudi Arabia? 
Swicorp is actively deploying its own funds alongside those of co-investors to invest directly in Saudi companies, which have a clear source of sustainable competitive advantage and leadership position within their industry and are benefiting from recently realized or expected structural changes within the sector.
Through its network of relationships and on-the-ground presence, Swicorp is ideally positioned to invest in privately-held companies that benefit from the long-term attractive fundamentals of the Saudi market and which will play an important role in the future growth of the Kingdom’s economy.
Toward the end of last year, Sadeed Investment Ltd., a Swicorp and partners-owned investment vehicle dedicated to making investments in the Saudi steel sector, acquired a 30 percent equity participation in BRC Industrial (Saudia) Ltd., one of the leading long steel products manufacturing and processing companies in Saudi Arabia, which has been growing steadily over the past 30 years on the back of strong investment in infrastructure in the Kingdom.
Another syndicated private equity transaction is approaching the final stages of completion, and Swicorp has been actively developing a strong pipeline of similar opportunities which is likely to lead to significant activity in this area over the next 12 to eighteen months.
The real estate sector is another area of major importance for Swicorp.
In recent years, Swicorp developed a particular expertise in providing structured finance solutions to real estate development companies and projects and has been actively involved in many of the mega infrastructure projects currently transforming the landscape across Saudi Arabia and the GCC.
Swicorp also acted as financial adviser to some of the largest real estate development projects in the holy cities of Makkah and Madinah.
Leveraging this expertise, Swicorp recently developed a thriving real estate fund activity, commencing with the successful structuring and launches of the Al-Dhawahi and Ewan Al-Qayrawwan real estate fund.
Following these, we have a good pipeline of projects at different stages of progress, and are looking to launch several new funds to capitalize on the opportunities in the different real estate sectors and regions of the Kingdom in the near future.
We are confident that real estate fund management will develop into a major activity for Swicorp in the coming months and years.

What are your future plans in the field of asset management?
Swicorp is committed to developing and growing each of our main areas of expertise.
For asset management specifically, we intend to capitalize on our strong track record to offer existing and new clients tailor-made solutions that may benefit from our investment philosophy and insights.
Aside from real estate funds, Swicorp launched its Tharwa fund last year, an equity fund investing in the main regional stock markets.
This fund was launched by our asset management team following several years managing Swicorp’s own portfolio very successfully with returns consistently exceeding local and regional indexes.
With the client portfolio management license secured in 2014, Swicorp is now in a position to offer tailored asset management services to our clients in addition to our fund offerings.
In terms of new products, we tend to be very selective and avoid chasing the latest trend or hype.
We rigorously assess each opportunity and need to be fully convinced that the product will bring real value to clients and that the timing of such launch is appropriate.
In listed equities, for example, we decided to go to the market and meet clients only after testing our approach and philosophy by managing our own capital successfully for over three years and after ensuring we had the right capabilities to manage third party money.
This is reflected in the nature of the products we launch; we look to add real value to clients and demonstrate our confidence in and commitment to each product by having ‘skin in the game.’
In the near term, we are working on launching multiple new products.
In listed equities, the recent favorable activity in IPOs and the relative advantage that public funds have in the allocation process offers a window of opportunity to launch a fund that benefits from this trend.
Also, we are working on launching an innovative fund that would invest based on internally developed models and takes advantage of ‘short-lived’ anomalies in the market.

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Interview with Daniel Schenker, CEO – Swicorp

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Daniel interviewInterview with Daniel Schenker, CEO –  Swicorp

Brief profile of the company indicating when it was set up, its strengths and its aspirations.

Swicorp is a leading investment banking, private equity and asset management firm with a specific regional focus on the Middle East and North Africa (MENA).

From its headquarters in Riyadh and regional offices in Jeddah, Geneva, Tunis and Dubai, Swicorp provides corporations and investors with independent advice and assistance on key strategic financial and investment issues. Founded in 1987 by current chairman Kamel Lazaar, and licensed by the Capital Market Authority of the Kingdom of Saudi Arabia, and the Dubai Financial Services Authority of the United Arab Emirates, Swicorp today has grown to be one of the region’s premier financial services providers.

Swicorp has an extensive track record over more than 25 years of pioneering mergers and acquisitions, advisory and real estate transactions across MENA for regional and international clients. Swicorp has also developed into one of the leading players in the private equity sector in MENA, raising over US$ 1 billion in private equity funds since 2005. Leveraging its extensive investment expertise and network, Swicorp also offers a range of asset management services across various asset classes to allow investors to benefit from the substantial opportunities arising from the attractive fundamentals and strong growth prospects of the MENA economies.

Major milestones in the company’s history and key projects it has developed to date.

During the 1990’s Swicorp was associated with many innovative transactions across a very-wide spectrum of sectors, including many mergers, acquisitions and joint ventures for leading Saudi companies (the merger of Savola Company with Azizia-Panda, both publicly-listed at the time, is one example), some of the first equity private placement transactions in the Kingdom and project finance raising for several privately-held companies and real estate development projects.  Swicorp also advised on other notable and innovative transactions, such as the leveraged buy-out acquisition of Arabian Company for Detergents (DAC), and subsequent joint-venture with Henkel (Germany), and the merger of Savola and Sime Darby’s edible oil businesses in Egypt, and subsequent Initial Public Offering (IPO) on the Cairo Stock Exchange.

Starting in the year 2000, Swicorp became even more active in regional markets outside of Saudi Arabia with successful acquisitions in Algeria for Henkel and Danone and multiple acquisitions, divestitures, debt and equity raising transactions also in Saudi Arabia, Syria, Egypt and Tunisia.

Still on the advisory front, shortly after the CMA was established for the development of the Saudi capital market, Swicorp applied for the relevant licenses and started developing its capabilities in the equity capital market by successfully assisting several Saudi clients in their rights issues or IPO transactions.

Gradually, Swicorp also developed a particular advisory expertise in the field of real estate developments, especially in the Holy Cities of Makkah and Madinah, where Swicorp has acted and continues to act as one of the leading financial advisors to the largest developers.

Swicorp initiated its private equity activity in 2005 by launching corporate venture funds for the MENA region, first with the Danone Group of France and then the Savola Company in Saudi Arabia. This activity grew steadily in size and importance and today Swicorp has also developed into one of the leading players in the private equity sector in MENA, raising over US$ 1 billion in private equity funds for Joussour, Intaj I and Intaj II since 2005. More recently, and to serve the interest of certain investors, Swicorp has earmarked some of its own funds to co-invest in club-deal transactions, that it is identifying, structuring and placing equity investments in leading privately-owned companies on a case-by-case basis.

To complement its advisory and private equity offerings, Swicorp established a new Asset Management division with the vision to build on its strong track record in managing proprietary listed equity portfolio, as well as launching Real Estate Funds to capitalize on our edge in Real Estate Advisory.

On the corporate side, a major milestone in Swicorp’s history occurred in 2007 when, following receipt of the CMA’s approval, Swicorp restructured its organization and moved its corporate headquarters to Riyadh. Managed from Riyadh, the group now consists of offices in Riyadh, Jeddah, Tunis, Dubai and Geneva.

What are the major projects currently being developed by the company?

Due to the confidential nature of our assignments, specific project or client names cannot generally be disclosed. However, it can be said that Swicorp remains very much involved in advising the promoters of several large-scale real estate development projects and also expects to announce the completions of several mergers and acquisitions transactions in the next few months .

On the investment side, Swicorp has just completed an important club deal via the acquisition by Sadeed Investment Limited (an investment vehicle created by Swicorp and its investment partners) of a 30% equity participation in BRC Industrial (Saudia) Limited. Founded in 1974, with a top line poised to exceed SAR 1 bn this year, BRC is one of the leading long steel products manufacturing and processing companies in Saudi Arabia and has been growing steadily over the past 30+ years on the back of strong investment in infrastructure in the Kingdom. Through the ongoing commissioning of its new Dammam plant and the establishment of a new facility in Jeddah, the company is expected to double its capacity and is confirming itself as the partner of choice for all concrete reinforcement needs and fencing solutions across the Kingdom.

As mentioned above, Swicorp has been actively developing and broadening the products and services of its asset management division. In addition to managing funds invested in regional stock markets, Swicorp  has been expanding its  asset management offering by entering the real estate fund activity. We are very pleased to have been able to launch the Al Dhawahi fund earlier this year, in partnership with Al Nesaj DevelopmenT. This marks our first real estate fund and, with several others in the pipeline, we are greatly encouraged by the future prospects of this activity.

Which areas are the most vibrant for your projects in Saudi Arabia? Do you intend on expansion towards other areas?

Following on from the successful launch of the Al Dhawahi fund, investor appetite for such investment products is very strong and we are working towards the structuring and launch of several new funds in the near future.  We are confident that this will develop into a very important activity for Swicorp in the coming months and years.

Aside from real estate, we have also launched Tharwa fund, an equity fund investing in the main regional stock markets. This fund was launched by our asset management team following several years managing Swicorp’s own portfolio very successfully with returns consistently exceeding local and regional indexes.

In addition, we have just secured a client portfolio management license, which will allow us to offer tailored asset management services to our clients in addition to our fund offerings.

Do you exclusively focus on the Saudi market, or are you similarly interested in other foreign markets?

The Saudi market has always been and will remain the Swicorp’s most important focus in view of the tremendous attractions and opportunities of the market in the Kingdom. However, Swicorp has historically also been highly active right across the MENA region, with a track record of transactions in North Africa, Egypt, Turkey and the Levant and across the Gulf. These regional capabilities are reflected by the presence of dedicated staff located in strategic areas in offices across the Gulf and North Africa.

Whilst we do not intend to stray too far from our primary geographic focus, we are also assessing opportunities to develop some form of presence in adjacent emerging markets where we may leverage our knowledge, expertise and network for the benefit of our valued clients and investors.

What are the major initiatives to further the company’s growth and drive its vision?

See (G) below

What are your plans and strategy targets for 2015?

Swicorp is driven by the desire to leverage its financial and intellectual capital to help our clients and investors realise their objectives. We know that if we succeed in this aim, Swicorp will also be successful. We believe that Swicorp has built a special, indeed, unique platform in MENA, and over the past two years, all our businesses have grown stronger. The core blocks which will drive future growth are already largely in place and established. In summary these are: as follows

  • Investment banking will look to continue the growth of its corporate finance advisory business, including  in mega real estate and advisory projects, an area where Swicorp has established clear market leadership.
  • Private Equity will look to grow the ‘club deal’ activity was well as sourcing and structuring initiatives to develop new PE funds with a specific geographic or sector focus
  • As explained before, we will look to expand our asset management activities by developing new products and increasing the level of assets under management
  • Elsewhere, we will continue to look for additional opportunities to grow and diversify our activities by leveraging our strong platform in the Middle East and North Africa, and maybe developing partnerships and joint ventures in other markets where our expertise and abilities may add value.

What about issuance of stocks and bonds; any successful transactions in this field? Any special way of dealing with the investment funds and have you actually started Funds that are capable of financing as well as mergers and acquisitions?

Swicorp was very active early on when the markets started opening up for new listings under the CMA’s guidance and a new regulatory framework. We were successfully involved in the rights issues of Savola, Fitaihi, MCDC and the IPOs of Red Sea Housing and Knowledge Economic City. However, being an independent investment bank without the balance sheet size of the large commercial banks, we are inevitably more restricted in terms of the underwriting capacity we can offer if we wish to maintain the required levels of capital adequacy. Hence whilst we are occasionally prepared to participate in underwriting equity securities, we typically choose to be involved in these types of transactions only on a selective basis as part of a wider relationship with key clients.

As we are still in the early stages of developing our asset management activity, we have not yet offered specialized funds, such as mezzanine funds, although these type of funds are likely to be considered in due time. However, the recent changes in CMA’s rules for allocating shares during IPOs, clearly favouring public funds, provides a window of opportunity to launch a new IPO fund that we will offer in the near future.

In your opinion and based on your experience, what do the investment and brokerage companies need most?

The key driver of success for any investment banking firm anywhere in the word is the quality of its people. In a highly-competitive  but still developing investment banking market like Saudi Arabia, the ability to recruit and retain talented professionals is critical and I strongly believe that the quality of Swicorp’s people sets us apart from our competition in the region. Initially, with the Saudi investment banking industry in its infancy, Swicorp and most other investment banking firms in the Kingdom, had to bring in much of the investment banking knowledge and experience required to develop the industry from outside. I am very happy that in recent years Swicorp has been able to hire and develop an increasing number of talented and committed Saudi investment banking professionals who play important roles across all Swicorp’s activities and projects. It is the continued growth and development of local talent that represents the best security for firms like Swicorp to keep on being successful in the years to come

What are the challenges for the investment companies and brokerage in the GCC region?

See (I) above

What are your future plans, specifically in the field of real estate investment Funds?

Swicorp is committed to developing and growing each of our main areas of expertise. For asset management specifically, we intend to capitalize on our strong track record to offer existing and new clients tailor-made solutions that may benefit from our investment philosophy and insights.

In terms of new products, we tend to be every selective and avoid chasing the latest trend or hype. We rigorously assess each opportunity and need to be fully convinced that the product will bring real value to clients and that the timing of such launch is appropriate. In listed equities, for example, we decided to go to the market and meet clients only after testing our approach and philosophy by managing our own capital successfully for over three years and after ensuring we had the right capabilities to manage third party money. This is reflected in the nature of the products we launch: We look to add real value to clients and demonstrate our confidence in and commitment to each product by having ‘skin in the game’.

In the near term, we are working on launching multiple new products. In listed Equities, the recent favorable activity in IPOs and the relative advantage that public funds have in the allocation process offers a window of opportunity to launch a fund that benefits from this trend. Also, we are working on launching an innovative fund that would invest based on internally developed models and takes advantage of ‘short-lived’ anomalies in the market

In real estate, we have a good pipeline of projects and we expect to shortly announce additional new products that capitalise on the attractive real estate markets in various regions of the kingdom

What are your comments on the potential offered by the real estate market now and what are your recommendations to drive further growth in the market?

The Real Estate Fund Management sector is very promising and we believe Swicorp has a competitive edge, as we were involved in many of the major Real Estate Projects in the Kingdom, and have built an unparalleled  Advisory expertise in this sector. Leveraging the knowledge, insights and experience we have gained in the real estate sector over the past decade,  we already secured two funds for 2014, the first of which (Al-Dhawahi) has just closed. The second one is related to a large project in Mecca and we are very confident on the prospects it brings to clients.

The real estate fund pipeline is very strong and of a very high quality. Swicorp has the capability to source attractive projects, combining interesting Real Estate locations and high standard partners and developers. We believe these are the keys to a successful real estate fund.

Saudi Arabia is currently witnessing numerous changes in the projects and work market, how does this impact your projects?

We are monitoring closely what’s happening in the labor market and, more generally, in the economic and regulatory environments we operate in. Overall we see the latest initiatives and changes as beneficial to business participants committed to the long run. We also believe that the short term uncertainties and dislocations created in some areas of the economy are actually opportunities for investors, as they are accompanied with some mispricing in certain assets.

Regarding our ongoing projects, we are always careful to identify, assess and mitigate any risks which could arise during the ‘structuring’ and design phase of each project, so do not have any major concerns in this regard.

How attractive is the Saudi stock market and why? How do you evaluate the performance of the Saudi equity funds?

Compared to the rest of the GCC, KSA has a much deeper and diversified market, driven by a population of just under 30 million. It is by far the largest market in size and in liquidity. The level of corporate governance and investor communication is higher than other countries, making the stock market more investor friendly. These factors make investing in Saudi Arabia a compelling proposition.

Compared to mature markets or other emerging markets, the Saudi economy has shown good resilience in the past and offered prospects for more dynamic growth. The recent positive performance has put the Saudi stock market in the spotlight and attracted more inflows from foreign investors.

Funds in KSA have generally enjoyed a positive performance in 2013 and this has continued into 2014. Markets across the region rebounded strongly on the back of a normalization of risk premiums and better fundamentals, and equity funds have benefitted from this improving environment.

The industry as a whole is becoming more and more professional. After the 2008 crisis and the market downturn of 2006, many Investment Managers strengthened their operations and capabilities in order to offer robust investment services to clients. These efforts have paid off in 2013 and 2014, and hopefully, will prove beneficial in the future, and in less favorable environments. This represents the real challenge for fund managers in KSA: regaining the trust of investors and constitute a credible and reliable alternative to other investment vehicles.

In your opinion, what are the challenges that face the Saudi stock market particularly in the field of regulations and legislations?

Local equity markets suffer from some of the same problems we find in other emerging and frontier markets. These are mainly a relative lack of liquidity in parts of the market, some governance issues and financial reporting and communications that are still not optimal. We believe that these obstacles for the development of local markets are diminishing and that they will increasingly resemble and conform to the standards of more developed markets. Actions from regulators, like CMA in KSA, are oriented in that sense and are helping the markets develop. Events like UAE and Qatar’s access to MSCI Emerging Markets Status will accelerate this shift to more dev

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“MENA asset management sector promising”, interview with Mr. Kais Mbarek, Swicorp’s Head of Asset Management

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JEDDAH – The asset management sector in the Middle East and North Africa (MENA) region, though at present is relatively unexplored, will “ultimately occupy a much larger position than today,”  Swicorp Managing Director and Head of Asset Management Kais Mbarek said in an interview.

Asked about the size of the asset management market in the MENA at present, he said “while some markets like Saudi Arabia has a relatively large and deep market, the size of assets under third party management is small when compared to other countries and regions.

There are many reasons for this under-penetration and we think many of these obstacles are fading if not disappearing. The process will take time and will experience some hiccups but we are confident that ultimately the Asset Management sector in MENA will occupy a much larger position than today.”

He added that “asset management market size in a given country or region depends on too many criteria and it is very difficult to extrapolate what happened in one country to our region.  However, we are convinced that the market as it is today is far from its potential and that there are opportunities that are simply untapped. The penetration of funds or third party money management is low.”

Excerpts from the interview follows:

Where do you see growth for your firm in MENA?

We consider that Third Party Fund Management is still in early stages in MENA region and offers substantial growth opportunities. Strong economy, demographical trends and better governance make the asset management industry in MENA a growth industry. KSA is by far the largest and most promising market, but opportunities in GCC and North Africa are also substantial.

Regarding asset classes, we still see potential in all three: Stock Markets, Real Estate and Private Equity. Swicorp will launch other products in other asset classes when we see the timing is right and that it would add value to our clients to be exposed to them.

What are your firm’s asset management services?

Swicorp assists its clients in growing and managing their money. We developed our expertise in three main areas: Stock Markets, Real Estate and Private Equity. Swicorp offers investors exposure to a range of asset classes, depending on their goals and profile. Our expertise is regional with the main focus on KSA.

Investors can benefit from our know how in multiple ways: via investment in existing funds, on a ‘deal by deal’ basis or through a ‘tailor made’ product if needed.

Swicorp has been present in the Kingdom for more than 25 years and we believe we have built unique capabilities that can serve local investor needs and offer superior performance.

How has the Tharwa Fund grown? Kindly describe its performance.

Firstly let me explain Tharwa Fund. It is a private placement fund invested in MENA stock markets and is offered to a very limited number of clients as per CMA regulation. Swicorp launched this fund after managing successfully our own capital and we wished to open up these capabilities to qualifying third party investors that have the appropriate risk profile. Some of our clients were early subscribers to the fund and subscriptions are still open to interested investors. In parallel, we will be launching shortly a version of the Tharwa Strategy that will be tailored to public investors.

As mentioned earlier, our performance and track record position us in the top league. But more importantly, we believe that our investment philosophy, the investment approach we developed and the disciplined investment process that we put in place are capable of delivering solid and consistent results over an entire economic cycle whilst maintaining a disciplined approach to risk management. The fact that Swicorp is committing a substantial portion of its capital to the strategy ensures the alignment of interest of all parties.

What is the breakdown on types of investors, individual and institutional?

Most of Swicorp’s clients are institutional and Ultra High Net Worth Individuals. But we are launching new products, mainly invested in stock markets but also in real estate, that will be offered to individuals and to the public

What percentage of investors are foreigners? What is their national make-up?

Swicorp has a geographically diversified client base. It is however important to note that our international clients are mainly present in Private Equity products. We feel that this is changing as more and more clients outside MENA enquire about the stock market and sometimes about real estate market. More investors are discovering the virtues of GCC economies compared to other emerging markets: solid fundamentals backed by strong oil reserves, favorable demographics and dollar peg. Some of these markets are difficult to access directly for a foreigner. Funds and other products are an attractive way to gain exposure to them.

How attractive is the fund for overseas investors?

The region offers a unique combination of favorable demographics, solid financial position and scale. Foreign investors are also attracted by the fact that currency risk is virtually inexistent with the peg to US dollar. The fund allows the investors to benefit directly from these factors.

Foreign investors can rely on Swicorp’s local knowledge and expertise to weather the volatility of the market and to distinguish between fundamentals versus hype. The team has extensive experience in managing funds, is based in Riyadh and relies on research intensive investment process that places a major emphasis on risk management.

How attractive is the Saudi market for stocks and why?

Compared to the rest of the GCC, KSA has a much deeper and diversified market, driven by a population of just under 30 million. It is by far the largest market in size and in liquidity. The level of corporate governance and investor communication is higher than other countries, making the stock market more investor friendly. These factors make investing in Saudi Arabia a compelling proposition.

Compared to mature markets or other emerging markets, Saudi economy has shown resilience in the past and offered prospects for more dynamic growth. The recent positive performance put the stock market in the spotlight and attracted more inflows from foreign investors.

What more can be done by the CMA to secure greater foreign ownership with the capital markets in KSA?

KSA occupies an increasingly important position in world economy, and there exists a strong interest from international investors to have exposure to KSA stock market. For the regulator and the exchange, direct access to the market should broaden the investor base with an objective to become more “institutionalized” and less volatile.

Saudi Arabia already made positive steps in order to enable foreign investors to access the Stock Market. Indirect access via Swap agreement was established in 2009 and ETFs were introduced in 2010. Tadawul and CMA have initiated other steps towards ultimately opening up the market for direct foreign investments. We believe KSA authorities are keen to encourage increasing foreign participation within reasonable limits and whilst ensuring Saudi/GCC investors will not be disadvantaged.

 

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