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Corporate governance key to success of external funding and IPO, hear Arab family businesses.

The two day programme attended by over 20 family businesses from the region was organised by Tharawat Family Business Forum and Borsa Italiana with the sponsorship of Rothschild.

Hischam El Agamy, Executive Director, Tharawat Family Business Forum said, "The purpose of the workshop was to help family businesses evaluate the various methods of external funding available and to be prepared for changes that an IPO or other forms of funding ensue. The most important challenge a family business faces when availing external funding is establishing a corporate governance structure to ensure transparency and accountability at every stage of operation. There are also other requirements like preparation of financial track records, appointing the right advisors and book runners and preparing a strong forward looking business plan. The workshop helped participants to be better prepare for such requirements."

Speaking at the event on IPOs, Paul Reynolds, Managing Director and Head of Debt and Equity Advisory, Rothschild Middle East said, "IPO preparation can take many years. But the preparation itself, say strategic focus, risk control, governance and external communication, brings benefits in terms of scaleability, growth, financeability and organisational fitness - whether or not an IPO occurs."

"IPO may or may not be right for any particular potential Issuer: it is just one of many fund raising alternatives that can help family businesses meet their strategic or ownership objectives - and these all deserve careful consideration. When the IPO process itself begins, maintaining optionality around these alternatives as well as optimising the equity story and selection, management and incentivisation of book-runners, is critical."

According to Luca Peyrano, Head of Continental Europe, Primary Markets of London Stock Exchange Group, a successful IPO can take up to a year or more to complete and will have long lasting and positive effects on the company's organisation and competitive position.

He also spoke about the need for transparency that an IPO entails which in turn requires good corporate governance practices.

"Once a company is listed, it is required to provide information regarding compensation, transactions with third parties, conflicts of interest, competitive positions and future plans. In addition, the company is expected to make financial disclosures required by the respective stock exchange. This means that a company must review all its management systems, resulting in a major leap for the company structure."

"While an IPO can be a great boost and opportunity for growth, family businesses must however be prepared for a certain dilution of control, as well as changes in their governance practices," explained Peyrano.

The event was supported by Dubai Financial Market and Nasdaq Dubai who jointly addressed regional specificities. This was followed by a case study of Drake & Scull International and Depa Ltd, two privately owned companies that went public.

2009 CPI Financial. All rights reserved.

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Publication:CPI Financial
Date:Nov 24, 2010
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