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/