the cfo middle east | issue 3

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Vol. 1ISSUE 3

THE REAL THING

DAVE ANDERSoN REFRESHES THE WoRlD oF MERGERS & ACQUISITIoNS

DIFCS DECADE

MERGING MOXIE

FLYING ANEW FLAG

10 years and counting

tHe guLF consoLidates For groWtH

encouraging eMPLoyee MoBiLity

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YOU WANT AHIGH FLYING CAREERThe Chartered Global Management Accountant (CGMA) designation is powered by two of the worlds leading accounting bodies, AICPA and CIMA. Having these globally recognised letters after your name tells employers that you are a successful professional with finance knowledge and business expertise.

CIMA Middle EastT. +971 (0)4 368 9432E. [email protected] CIMA to +971 (0) 50 633 0799 for call back www.cimaglobal.com/middleeast

Ewan Cameron, Chief Financial Officer, Mannai Corporation, QSC

Fast track routes available for MBA, CA, BBA and

BCOM holders. Special pricing ends

31st December 2014.

MANAGEMENTDominic De Sousa

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Enterprises across the region are once more pursuing aggressive M&A strategies. Key localities across

the world are lifting from the mire of a recession addled environment and these effects are being felt

tremendously in the Gulf via renewed interest in mergers & acquisitions.

While recently attending the ICAEWs fourth annual Middle East Accounting and Finance Excellence

Awards I encountered a room full of the industrys finest. CFO of the Year Sana Khater, representing

Waha Capital, walked away with the top prize for her designation. Being recognised by the ICAEW as

Chief Financial Officer of a firm which has advanced tremendously on its vast acquisitions strategy

spoke volumes about how imperative M&A has become for the roles purview.

According to the research of Dubai Economic Councils Senior Economist Dr. Ali Tawfil Al Sadik,

though far shy of pre-crisis levels, M&A value has risen in recent years and is showing promising signs

of stability. Dr. Al Sadiks figures rely largely on the global marketplace rebounding and the subsequent

increase in international spending. As such, foreign investment has proven to be a major driver. A

landmark merger reached between Saudi Arabias regional beverage mainstay The Aujan Group and

Coca-Cola in 2012 acted as a precursor to the M&A activity seen at present. Cover subject Greg

Anderson spoke exclusively with CFO Magazine about his role in a deal that became the biggest

investment in the Middle Easts consumer packaged goods sector at a reported $980 million.

The diminished spending reticence of a once addled marketplace is effecting the spending habits

of many industries. While significantly impaired during the crisis the real estate market has now begun

to emerge from the rubble with massive rises in expenditure. A catalyst of the downturn was the vast

fragmentation of the realty sector. M&A has found success in alleviating the sectors splintering in

the UAE with the merger of Abu Dhabis two largest private developers Aldar and Sorouh. Aldar CFO

Greg Fewer shares this month how instrumental the Chief Financial Officer is in the critical flow of

information central to mergers of such grand scale.

Excitement abounds across a multitude of industries in a manner which is driving more to embrace

a philosophy of consolidation. Awards are being doled out to celebrate this reality. Foreign investment

is encouraging an influx of cross border M&A. And CFOs are finding their importance heighten with

every deal.

Steven Pradia

Assistant Editor

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Copyright 2014 CPI. All rights reserved. While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held

responsible for any errors therein.

M&A: ADDITION OR OMISSION?

YOU WANT AHIGH FLYING CAREERThe Chartered Global Management Accountant (CGMA) designation is powered by two of the worlds leading accounting bodies, AICPA and CIMA. Having these globally recognised letters after your name tells employers that you are a successful professional with finance knowledge and business expertise.

CIMA Middle EastT. +971 (0)4 368 9432E. [email protected] CIMA to +971 (0) 50 633 0799 for call back www.cimaglobal.com/middleeast

Ewan Cameron, Chief Financial Officer, Mannai Corporation, QSC

Fast track routes available for MBA, CA, BBA and

BCOM holders. Special pricing ends

31st December 2014.

The CFO Middle Easts Advisory Panel presents a dynamic group of experts and leaders in various aspects of the world of finance. As industry captains arriving from world-leading organisations and specialising in financial strategies, accounting and management these key personalities will play a vital role in ensuring the delivery of relevant and accurate analyses of the latest trends and issues in the business community.

Ahmad DarwishAhmad Darwish is a Board Member and Secretary General of the UAEs Accountants and Auditors

Association (AAA), an organisation tasked with the promotion and development of the accounting profession in the country. He is also the Senior Manager for Financial Accounting at DP World UAE and oversees the management accounting, treasury and asset management divisions of the company. With his extensive financial expertise Darwish is also the first Emirati to chair the UAE Members Advisory Committee of the ACCA.

Hanady KhalifeHanady Khalife is the Director of operations, Middle East and Africa, of the Institute of Management Accountants

(IMA). She is responsible for training providers, business partners, universities, governmental entities, amongst others. Khalife is also an expert consultant specialising in assisting clients develop and implement strategic business plans and build partnerships with key industry stakeholders.

Michael ArmstrongMichael Armstrong, FCA is the Regional Director for the Middle East, Africa

and South Asia (MEASA) of ICAEW. He is responsible for the ICAEWs work across the MEASA region, collaborating with key stakeholders, engaging with businesses across the region, supporting ICAEW members and working with both public and private sectors on raising awareness of the relevance of chartered accountancy catalysing economic growth. Armstrong has extensive experience advising financial institutions and energy and natural resources companies in addition to having held several leadership and advisory positions in business and government.

David ThomassonDavid Thomasson is the founder and Managing Director of Phoenix Financial

Training. David is a fellow of CIMA and worked in the accountancy industry for many years before moving into training in the 1990s. PHOENIX offers courses leading to Professional Finance Qualifications in ACCA, CIMA and ICAEW in Dubai and India. Offering a range of bespoke financial courses in Financial Awareness Building and Corporate Treasury Phoenixs student body ranges from independent students to practitioners of private companies and sovereign wealth funds.

Lindsay Degouve de NuncquesLindsay Degouve de Nuncques is the UAE Head of the Association of

Charted Certified Accountants (ACCA).

Her role entails spearheading discussions with regulators, business leaders and important stakeholders to strengthen the ACCAs network and profile in the region. Degouve de Nuncques has spent more than eight years with ACCA in various senior roles.

Geetu AjuhaGeetu Ahuja is the Head of GCC for the Chartered Institute of Management Accountants (CIMA).

Responsible for developing the growth of operations and positioning the global brand of CIMA across the GCC region, Ajuha establishes strategic partnerships with global and regional entities. She is also responsible for overseeing the launch of various region specific CIMA nationalisation programmes in the GCC.

Paul GylesPaul Gyles is the Regional CFO and Board member for all ISG Group companies an international construction

services company delivering fit out, construction, engineering services and a range of specialist solutions. He is responsible for the finance, HR, IT, admin and legal functions for ISGs Middle Eastern outfit. A key aspect of the role is project funding and raising external financing by working with both Arab and international banks. Gyles is also the Chairman of the Steering Committee of the MECA CFO Alliance, the largest CFO networking group in the Middle East.

Advisory PanelTHE CFO MIDDLE EAST

CONTENTS

Infographic Dubai Economic Council

WCOA ISG10 12 14 18How CFOs view Mergers & Acquisitions.

Dr. Ali Tawfik Al Sadik analyses global commerce.

CIMA and AICPA launch a flagship report in Rome.

Construction CFO Paul Gyles sizes up the Gulf.

22

26

Davis Thomasson

Accordion

The author attends the 10th anniversary of the DIFC and offers his expert opinion on what to expect in the next decade.

A unique New York consultancy delivers best practice to the GCC.

32ProcladA Q&A with Oil and Gas cladding Financial Controller Mark Downie.

Through acquisitions we have been able to better control our projects critical components.

CONTENTS

61

63

6858 65linda luu

ERPs Focus

opinionWomen in leadership Economic Forum

Chief Investing with Al Masah

Locktons Vice President of Finance discusses risk management.

Geetu Ahuja of CIMA expounds on performance related pay.

Aldar Raju Menon IMABusiness Banking34 47 4844Abu Dhabis largest private real estate developer is primed for continued growth.

ICAI Dubais chairman discusses whats ahead for the Institute.

How to cut a deal when an M&A looks D.O.A.

An overview of where a mass of increased lending is heading in the UAE.

34

54

38AUJANGroup CFO Dave Anderson lays bare the many moving parts of the Saudi conglomerate.

As a CFO I think it is very important that you are tuned into how the market you are working in is evolving.

54ZafcoThe global tyre distributor heads to Southeast Asia for its latest round of M&A.

Seal

the

dea

l:

Merg

ers &

Acqu

isitio

ns Overall OutlOOk 57%

34%

expect to pursue acquisitions in the next 12 months

The top 5 transactions made up 85.3% of the total M&A value in the region during Q1 2014

Middle East and North Africa M&A deal values increased from $31.6 billion in 2011 to $44.8 billion in 2012

Sources: Bridging the Gap: M&A by Deloitte; EYs Capital Confidence Barometer Smaller strategic deals lead market recovery; Going Global strategy and execution in cross-border M&A by Baker & McKenzie

This marks a 42 per cent jump

The UAE and Qatar lead regional deal activity

Major deal: acquisition of the Qatar-based Barwa Bank by Qatari Diar Real Estate Investment Company for $0.7bn

plan to make further acquisitions within the next two years

79% expect their deal pipeline to increase over the next 12 months

Construction

Diversified industrial products

Consumer products and retail

Telecommunications

tOp trends

sectOrs with highest intentiOns tO pursue acquisitiOns

CFO InfographicPROJECTIONS

10 www.thecfome.com

MERGERS & ACQUISITIONS IN ThE MIddlE EAST

understanding crOss-bOrder M&a

cOre M&a Objectives

key drivers

what are the priMary M&a funding sOurces?

why chOOse M&a Over jOint ventures?

greatest cOncerns

34% 25%

53%

21%

37%

12%

6%

8% Access to customers Intellectual property

Available cash

Industrial assets

Debt

Natural resources

New equity issuance

Human capital

34% plan to undertake another cross-border deal in the next 2 years

42% Enter new geographic markets

$263.1BN value of cross-border deals for Q1 2014

42% Expand customer base in existing geographic markets 32% Pursue cost synergies or scale efficiencies

86%

64%

consider their last cross-border M&A deal to be successful

Product/service differentiation

33% Risk of conflict around decision making and control

43% Failure to effectively integrate

15% Desire for full ownership of assets and profits

16% Changing regulatory and legislative environment

19% Lack of suitable joint venture partners

14% Inaccurate target valuation

13% Unsuitable legal environment for enforcing joint ventures

12% Economic uncertainty

CFO InfographicPROJECTIONS

11www.thecfome.com

CROSS-bORdER MERGERS & ACQUISITIONS

WhAT ARE ThE CFOs SAyING?

www.thecfome.com12

ThE Dubai ECONOmiC COuNCil wEighS iN ON m&a grOwTh

I am a macro economist and believe offering a global view helps to better understand the M&A market.

Global FDI inflows peaked in 2007 reaching more than 2 trillion dollars, of which 22% represented cross border M&As whilst the balance represented greenfield projects. In terms of numbers, there were 12,199 cross border transactions and 12,974 greenfield projects in 2007. The 2007 2008 global financial and economic crises negatively impacted the global and regional FDI flows tremendously. In fact, FDI inflows dipped to 1.3 trillion dollars in 2009, and by 2013 they recovered

partially to $1.4 trillion. Global M&A transactions reached 8,634, valued at $780 billion and the number of greenfield projects amounted to 14,215, valued at more than $672 billion in 2013.

Greenfield projects in the manufacturing sector accounted for 38.5% and services for 57.2% and the balance went to the primary sector in 2013.

FDI inflows, especially the Greenfield projects, are important to the receiving country since they create value added, jobs, and increased exports, also adding to the stock of wealth, deepen globalisation, create

DEC Senior Economist Ali Tawfik Al Sadik offers his expertise on how Mergers & Acquisitions are shaping up in the UAE due to connectivity between global trends, FDI and the partnerships they encourage.

competition and facilitate technology transfer. In 2013, value added by foreign affiliates amounted to $7.5 trillion, equivalent to a little more than 10% of world gross domestic product (GDP), employed more than 70 million persons, and exported more than US $7.7 trillion, equivalent to a little more than 33% of world exports.

In general, FDI has direct and indirect effects on an economy. The direct effect is reflected in higher growth rates which are generated by higher capital formation. The indirect effect emanates from the efficiency gains that are associated with technology

$780bValue of global M&A in 2013

STaT FaCTS

www.thecfome.com 13

transfer and competition that FDI generates.

Economic determinants often divide FDI into two broad categories:

MarketseekingFDI,whichis tariff jumping investment driven by larger markets or regional trading areas,

EfficiencyseekingFDI,whichcan take the form of export platform investment in final goods and investment in internationally integrated industries

For the UAE, FDI inflows peaked at US $14.2 billion in 2007, and plunged to US $4 billion in 2009. However, the FDI inflows recovered to almost US $10.5 billion in 2013. The value of cross border M&As in the UAE peaked at US $1.3 billion in 2008 and dipped to only US $299 million in 2009 and recovered partially in 2010, after which it declined to US $286 million in 2013.

The value of UAE greenfield projects peaked at US $36.2 billion in 2008, followed by a declining path and reached US $6.8 billion in 2013.

In the United States of America, the Committee on Foreign Investment in the US (CFIUS), is a multiagency government body chaired by the Secretary of the Treasury. The Committee reviews proposed M&As and greenfield projects and presents recommendations to the President who has authority to accept or reject the proposed transaction. This is a standard the UAE is drawing nearer to exemplifying as well.

UNITED ARAB EMIRATES: VaLuE oF grEEnFIELd FdI ProjEcTS (mILLIon oF doLLarS)

2003

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

8,951

3,613

10,388

15,327

12,372 13,067

36,218

12,87011,623 12,053

6,821

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

aT ThE gLobaL LEVEL (bILLIon uS $)

FdI InFLoWS croSS-bordEr m&a m&a % oF FdI

2011 2012 20132005 - 2007PrE crISIS aVEragE

780

556

1330

332

1452

349

1700

1493

25.032.752.224.0

UNITED ARAB EMIRATES (mILLIon oF doLLarS)

unITEd arab EmIraTES (ouTFLoWS) unITEd arab EmIraTES (InFLoWS)

18,000.0

16,000.0

14,000.0

12,000.0

10,000.0

8,000.0

6,000.0

4,000.0

2,000.0

-2,000.0

-

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

1,183.8

3,750.3

10,003.5

15,820.3

10,488.0

2,905.2

World Congress of AccountantsGLOBAL GATHERING

www.thecfome.com14

Cgma rEpOrT lauNChED

The World Congress of Accountants (WCOA) met in Rome, Italy 10-13 November for the 19th edition of one of the professions most heralded events. WCOA was well attended by accountants from every corner of the world under a theme which sought to unite the accomplishments of the past with what finance professionals deem essential in the years ahead.

2020 Vision: Learning From The Past, Building the Future provided an excellent platform for WCOAs imperial

sponsors the Charted Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) to launch a flagship report on the open workforce under the banner of their joint designation Chartered Global Management Accountant (CGMA).

The CGMA has been established as a result of two of the worlds most prestigious accounting bodies, AICPA and CIMA, forming a joint-venture in order to elevate the profession of management

2020 Vision: Learning From The Past, Building the Future provided an excellent platform for WCOAs imperial sponsors CIMA and the AICPA to launch a flagship report.

The trend of an increasingly agile open workforce is affecting the global activities of industries worldwide. A recently released flagship report is inducing accountants to respond to the implications of this pressing development.


www.thecfome.com 15

The driver for the work was to try and think about the future, to think about external trends and then relate that to the lives of the finance profession.

accounting. The designation recognises the most talented and committed management accountants with the discipline and skill to drive strong business performance. CGMAs open workforce report is indicative of the progress the organisation is committed to making.

With the release of this report we wanted to stick to the importance of WCOAs theme and encourage people to think in a new way about the accountant. We started looking around at key trends. We

www.thecfome.com16 www.thecfome.com16

directly after this spirited discussion took place.

The following day we ran a presentation where we went into detail about the importance of our findings, going through the key highlights and as a result engaged in great conversation with those in attendance, detailed Lees.

Offering WCOA attendees the opportunity to think outside of the box related directly to the Congress intent of looking ahead to 2020. Challenges related to risk and intellectual property were discussed with the advancement of a flourishing open workforce in mind. The report aimed to additionally stem concerns that a mobile workforce simply amounts to a companys employees working from home.

This trend is more about collaborating well and being in the right place at the right time and not so much about everybody being absent from the office. Were also seeing this trend occur in the way that office buildings are being restructured in order to encourage better group effort, said Lees.

Ultimately, its all about looking into the future. The accountancy profession has traditionally looked inward. This report is a sort of provocation to the industry. We want accountants to really understand the business and their respective business models whilst also in the context of the external environment.

For more information about the report, visit www.cgma.org/ready.

were really looking at the way organisations are changing, said Gillian Lees, Head of Research and Development, CIMA.

The CGMAs report sought to compel the global crowd of accountants present at WCOA to think of constantly evolving work force trends which are witnessing increasingly mobile work environments, though with special attention paid to the accountancy profession.

Said Lees: The driver for the work was to try and think about the future, to think about external trends and then relate that to the lives of the finance profession. We want these individuals to think outwards and to look at the way the world is changing. Weve taken this general issue and related it to what finance professionals are trying to achieve within their respective remits.

The study found that organisations are relying more significantly on consultants, contractors and researchers in a bid to actualise better dexterity when approaching the widening global marketplace. The findings of the report are based on a Longitudinal Research survey of 1,100 senior executives as commissioned by CGMA.

WCOA hosted a number of panel discussions, networking areas and company stands at this years Congress. Central to the events dialogue was the plenary session, Businesses thriving in disruptive times, which brought together CFOs of Ernst & Young, British Telecom, Yahoo! and Royal Dutch Shell. CGMAs open work force report was launched

3,956Global delegates present at WCOA

STaT FaCTSIts all about looking into the future. The accountancy profession has traditionally looked inward. This report is a sort of provocation to the industry.


To facilitate and support our expansion drive for the coming years and to serve our

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We stay committed to our vision to provide the best and most professional Accounting,

Audit, Business & Management Consulting services to all our valued clients.

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Level 15, Lake Central - At The Bay, Business Bay, Al Abraj Street, P.O. Box: 55535, Dubai, UAE

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Offices in UAE (Dubai, DAFZ, Abu Dhabi, JAFZ, RAK FZ, RAKIA, Sharjah), Oman, Qatar, India

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ISGFEATURE

www.thecfome.com18

CONSTruCTiNg FrOm ThE iNSiDE OuT

International construction services company ISG has grown tremendously since its founding.TheUK-basedfirmfound a home in the UAE in 2007, initially setting up as a branchofficeinthecountrybefore establishing a full LLC entity. Listed on the London Stock Exchange and with 3,000 employees worldwide and almost GBP 1.5 Billion in turnover, ISG has effectively brought its winning approach to the region and was awarded Middle East Interior Contractor of the year in 2011 and 2013.

Though equipped to approach the construction services

industry from a number of angles, ISGs Middle Eastern outpostfocusesspecificallyoninteriorfitoutwithspecialattentionpaidtotheofficeandhospitality industries. ISGs intent to explore the latter has ledtothefirmslargestprojectin the region at the Kempinski Hotel, Mall of the Emirates.

With a large collective of projects pouring in through the UAE due to servicing a number of international and local clients, including several Mubadala-affiliatedprojectsinAbuDhabi,managingcashflowhas been imperative. Central to the essential nature of the

As Middle East CFO of construction services firm ISG, Paul Gyles role has proven critical in building the keynote development team.

Now that we have developed a strong UAE busi-ness, we are planning to expand into other GCC markets.

many moving wheels of the construction industry and the capital which drives it all is the ChiefFinancialOfficer.

The area which requires the majority of my time is without doubt Cash Management, and Im sure this would be the same for the vast majority of constructionCFOs.Cash-flowiscritical to delivering a successful project, after all you cant run a business on fresh air, said Paul Gyles, ISG CFO, Middle East.

Cash Management includes ensuringprojectcash-flowsare carefully monitored, and establishing banking facilities to ensure bonding lines and letter

ISG FEATURE

www.thecfome.com 19

of credit facilities are in place for the projects.

Whilst the bond market is crucial to supporting growth in the construction industry, the banking industry has proven a welcome boon. Banks in the Middle East have expressed more of a willingness to extend credit as compared to their international counterparts, a trend which has attracted ISG to expand in the region. The firmhasfocusedthemajorityof its regional energy into the UAE, whilst continuing onward to Qatar with a keen interest to furthermore delve into Saudi Arabia. Paul gyles, ISg

CFO time will be required to ensure we have the right legal structure, right local partners, and the right team on the ground.


internally and externally, and lastbutdefinitelynotleastisbuildingatopqualityfinanceteam. To evolve the CFO role, all these aspects need to be in place, said Gyles.

You need to be the right hand man and someone that the rest of the business can turn to. They go straight to the CFO knowing that youre an extension of the CEO. The MD would never make a commitment or financialdecisionwithoutmyinvolvement. Where we partner well is that I will focus on the operations, which then keeps him free to focus on business development and winning work.

Based on the backing of a well-trained staff, an excellent CFO and CEO relationship, and a very healthy forward order book, ISG is primed to grow furthermore in the years ahead. With an eye on new GCC markets and the capability to provide the same level of service seen in its original Western markets, Gyles nonetheless assures that thefirmwillnotabandonitspenchant for approaching the market carefully.

Said Gyles: The past few years we have been predominately focused on organic growth, opting for slow but safe advancement and building a platform of success. Going forward my role will be helping to drive the geographical expansion of the business in the region, but at the same time keeping any eye out for potential acquisition targets to help accelerate the growth and enhance our value proposition.

ISG

$2bISGs global turnover

300kISG emplyees worldwide

STaT FaCTSSaid Gyles: Now that we have developed a strong UAE business, we are planning to expand the business into other GCC markets, which will require CFO time and effort. We already have a small operation in Qatar but need to grow this into a much bigger operation. We will also be considering market entry into the Kingdom of Saudi Arabia in the near future, and this market has the potential to beasignificantmarketforanISG offering. CFO time will be required to ensure we have the right legal structure, right local partners, and the right team on the ground.

ISGs growth in the region has been catalysed by an organic ethos of well-placed projects and patience which has allowed the company to flourish.Afewaspectsrelatedto the ISG teams makeup have been key to this growth. Gyles lauds the abilities of hisfinanceteamwhichbringstrongoperationalfinancialmanagement to the table so that hes able to exist as an outward-facing CFO without growing too consumed with everyfinancialbitoftherole.

A second pairing paramount to the companys growth has been that which exists between FD and MD. Managing Director Alan McCready and Gyles work in a manner which complements one another whilst offering the business an enviable balance.

The key to being successful in a CFO role is to have an excellent working relationship with the Managing Director, becoming an MD/FD tag team, excellent business partnering

The key to being successful in a CFO role is to have an excellent working relationship with the Managing Director, becoming an MD/FD tag team.

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David ThomassonOPINION

www.thecfome.com22

rEvOluTiONary ChaNgE

Theres a saying isnt there the more things change the more they stay the same. I was reminded of this while watching the hugely impressive ceremony for the DIFC 10th anniversary event at the Gate Building earlier this month.

In the UAE the diversity and complexity which makes this a magic place for me often makeschangeverydifficult.As we try to drive the UAE forwardasthekeyfinancialcentre in the region and a pivotal hub between Europe and the Far East we are as always, subject to all sorts of specificallyregionaldemandsand drivers. For example the entire ceremony was conducted in Arabic, translation devices were placed on each seat but were not universally used. One might question whether this is the right decision for a country trying to position itself asafinancialhubwhenthecommonly accepted language offinanceisEnglish.Butittruly is more complicated than that. Arent we also trying to position ourselves asanIslamicfinancialcentre

in the world? When you then add in the huge importance of preserving Arabic culture and language and remember that this is not simply symbolic, things get more complex. The erosion of Arabic language use (particularly amongst the younger generation) and the fundamental challenges this poses for the future identity of the nation and the region is something I hear often discussed amongst my Emirati friends. Given my nearly 50 years in the UK prior to moving to Dubai, I have seen the Welsh language deteriorate and relegated over the decades. Based on this experience it seems vital to me that the sense of cultural identity that comes with the use of language is given primacy.

Whilst diversity is to be celebrated and embraced, as always in the UAE the tough part lies in the competing influencesandpressuresthatcome with a rapidly developing economy and an incredibly diverse population base but lets not forget that this is the fun part too! So if it is tough

David Thomasson, Managing Director of Phoenix Financial Training, has seen the finance industry transform markedly during his decade long engagement with the Middle East. Here he shares his thoughts on what the Dubai International Finance Centres tenth anniversary means to him with regard to the direction of the countrys finance industry.

to change and still maintain the integrity of the regions populous, lets focus on what has stayed the same and what needstobechangedinthefieldoffinance.

I have been coming to Dubai for ten years now and moved here in 2006 to establish Phoenix Financial Training in the DIFC. We were one of thefirst250businessesthereand have grown through bad times and good. In some ways my personal development and that of our business has been areflectionoftheten-yearDIFC journey. Some days I get depressed not with the constant sunshine, 50 years of


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800+Number of ACCA students attending Phoenix Financial Training

stage alongside established powerhouses such as the USA and new, powerful economies such as China, I feel a lot needs to change to assure long term success. So what would I like to see change?

As a country and as individuals we need to understand that an accounting degree does not make one an accountant! This is not a criticism of university education it is simply that except maybe with reference to some US degrees, undergraduate programmes are not intended to produce practicing accountants. That is why we haveprofessionalqualifications

STaT FaCTS

david Thomasson, managing director,

Phoenix Financial Training

Manchester rain cures you of that one no, I get depressed by how much needs to be done and how little change it sometimes seems we have achieved. Thereisstillahugefinancialknowledge gap in businesses notjustamongstnon-financemanagersbutwithinthefinanceand accountancy community itself. After all these years there is still far too much emphasis placed on years of experience or repeated tasks and processes and far too little on dynamic, challenging and professional financeskills.Foralongtimethe asset base of the UAE hasdrivencashflowsfortheUAE Government, associated

organisationsandprofitabilityfor many private companies. UAE-based entrepreneurs have demonstrated incredible inventiveness, hard work and business acumen in building profitablebusinesseshere.However in an ever more demanding world, where markets and individuals are better connected, where social media and networks provide marketing and communication channels unthinkable probably evenfiveyearsagoandwithBrent Crude dipping around $70 we are going to need to get so much better!

If the UAE is going to genuinely play on the world


careers, lives and businesses, but it is wrong for the UAE and its citizens to rely on people like myselfforeverfinancialskillsand understanding amongst the local population will secure this legacy for generations to come.

So what is the good stuff that is happening? Sometimes it seems like things havent changed, but I guess this is just when I am having a bad day! The DIFC has grown immeasurably, the number of companies operating there and the standards of disclosure and governance has moved forward. Recruitment companies now do increasingly specify globally recognised accountancy qualificationsasapre-requisite.Maybe we will soon see an end to the days when an advert saying the requirement is for an accounting degree or a professionalqualification(asifthese are the same thing).

Most importantly we have recently seen the launch of the UAECA qualification. Driven by the Accountants and Auditors Association (AAA) of the UAE at a federal level and using the underpinning of the ACCA syllabus and exam structure paves the way for the UAE financial professionals and institutions to play an integral part in the global accounting community. The qualification will in time become the byword for accountancy professionalism in the UAE and is a major step forward for the country and the profession here. Many individuals have worked hard to make this happen and the launch of this qualification recently is a major step for the UAE finance community.

Weve also seen ever increasing numbers entering our Institute. To be fair many of these still come from traditional demographic sources of young Indian and Pakistani graduates but an ever increasing number are Emirati. In addition, here at Phoenix, we are getting more and more requests from government, and entities related, to put training programmes in place for their nationals to develop qualifiedfinanceprofessionals.The growth in such enquiries has been without precedent in the last six to nine months we now get such enquiries on nearly a weekly basis, testament to a new realisation amongst national organisations of the needtosignificantlybuildfinancialcapabilityamongsttheir Emirati employees.

Accountancy is important and developedfinancialskillsarea pre-requisite for successful businesses. I know people sometimes think we are a bit dull (they dont really know how exciting we are!) but we are necessary. Businesses in the USA know this, organisations in the UK and Europe understand this, in the Far East it is a given. If the UAE is to genuinely become a world player we need to realise this too. I am sure it will happen, its been a bit slow but I can see lots of encouraging signs I am now looking forward to the next ten years here and hope that at Phoenix we can train even more of these much needed young professionals. I imagine that old adage is due for an update as a result: The more things change the more we see that things cant stay the same!

these take you through the technical and vocational aspects of what being an accountant means. We need to move to a scenariowherethoseclassifiedas accountants are graduates and have a professional qualificationtobehonestthedegree can be in any discipline. I see no evidence that an individual with a degree is going to be any more competent than one without if they both have the same professional qualification.Tomethedegreeisexpendablethequalificationismostdefinitelynot.

Secondly we need far more importance to be placed on theprofessionalqualificationsduring the recruitment process. If you are a CFO do you want to be surrounded by people of a similar age and experience as yourself or do you want to be surrounded by young, dynamic, well trained individuals who will come in and challenge the status quo and bring energy and new ideas into our businesses andprocesses?Thefirstwayiscomfortable but we know that the second is the correct path, uncomfortable though this might be at times!

Thirdly we need far more UAE nationals recognising professional accountancy as a vital and important career choice. At the end of the day the country belongs to the Emiratis, it is their asset wealth that underpins the economy and it is now time for a recognition that the skill base needs to be built to develop and secure this for future generations. It is wonderful that the UAE provides such a welcoming environment for expats such as myself where we can build

As a coun-try and as individuals we need to understand that an accounting degree does not make one an ac-countant!


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AccordionMARKET OUTLOOK

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aCCOrDiONS bEST praCTiCE

The GapCompanies within the GCC are becoming increasingly ambitious in their desire to approach new markets and explore untapped opportunities. Local GCC companies are extremely attractive investments for institutional investors within the Middle East and North African region as well as from abroad. Furthermore, companies within the GCC are evaluating their own strategic objectives to uncover new growth and expansion opportunities. To support both of these endeavours, the role of the corporate CFO is shifting. CFOs that were once considered

simply numbers gurus are now being called upon to act as stewards of strategic change within their companies. The increased opportunities for growth expansion within the company and higher appetite for investment by institutional investors means that the work oftheCFOsandthefinanceorganisation is becoming multidimensional and more complex than ever before.

Consequently, there are two dislocationswithinthefinanceorganisations in companies which the CFO must manage. Firstly, institutional investors and their portfolio companies needfinancialexpertstohelp

GCC companies looking to expand, may need help looking at acquisition opportunities and streamlining their processes.

Despite a lack of sufficient manpower and time, firms across the Middle East are more persistently attempting to bolster their finance function to mirror the global standard. A unique New York-headquartered financial services consultancy is showing them how.

AccordionMARKET OUTLOOK

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processes and work-streams within companies. Accordion focuses on three main areas to support all aspects of the CFOs organisation. Strategic Financial Reporting & Analysis includes tools and engagements to help companies gain better visibility intofinancialandoperationaldata and streamline processes to make more informed strategic decisions. Transaction Execution Support comprises activities to support internal teams with professionals who augment existing staff and help execute corporate development and strategy initiatives. Within the Finance Leadership product offering, Accordion can help to provide an interim senior levelresourcetoafinanceorganisation to provide immediate leadership in a high growth and change environment. Asfirmsstartlookingatglobalinvestments, said Accordion CEO Nick Leopard, Accordion is a great extension of that as were able to tap in and manage thevariabilityofthedealflowglobally. If we need someone with deep principal investment background and a knowledge of consumer products for Eastern Europe, we can help parachute that deal in.Forthepastfiveyears,

Accordion has offered its services to a range of companies in the US and abroad. The firmlaunchedinDubaiin2012, bringing experienced professionals from the US and around the MENA region to bridge shortages in team bandwidth and expertise for companies in the GCC. Concerns related to luring foreign expertise into the Middle East for full-time appointments may increase the complications

overseetargetedfinance-relatedprojects. Second, growth companies that are eager to grow mustcreatebest-in-classfinanceorganisations and evaluate expansion alternatives whilst realising that the organisation is in a situation where extra support and expertise is necessary.

Enter AccordionThese two gaps within various companiesfinanceteams,intheUS and in Dubai, has proved to be a perfect niche for Accordion. The need within the market is two-fold;thefirstisthattherearealotofPEfirms,sovereignwealthfunds,familyfirmsand

corporateofficeslookingatnew opportunities and they wanttoensurethefinancialand operational aspects of their investments are strong and well organised, said Amanda Robinson, Vice President of Accordion. Alternatively, for GCC companies looking to expand, they may need help looking at acquisition opportunities, streamlining their processes, and possibly assistanceonaspecificallyunique project. They may have the expertise to analyse andstreamlinethefinanceorganisation, but they are also involved in running their company on a daily basis.

Accordion was founded in New York City in 2009 with the objective of providing high-caliberfinancialathletesona project-basis to companies in need of technical modeling, transaction experience, and corporatefinanceacumen.Thefirmfillsaservicevoidthathas long been left vacant by traditional investment banks, consultingfirms,andaccountingfirmsandoperatesatanefficientintersection of cost and highly specialised services. Accordions financeprofessionalshailfromnotable investment banking institutions, private equity funds, and from industries delivering high-touch project-based experience without the prohibitivecostoflargerfirms.Accordions team meets the needforastrategic,financiallyfocusedconsultingfirmtoworkalongside clients and enhance enterprise value. Thequalificationsofthe

Accordion bench mean that their consultants have the real-world execution experience to bring best practices to the

The quali-fications of the Ac-cordion bench mean that their consultants have the real-world execution experience to bring best practices to the processes and work-streams within com-panies.


to-dayfinanceoperationsofthe company and navigating possible organisational changes. All of these activities must be performedflawlesslyoftenunder extreme pressure. The CFOandfinanceteammayneed additional resources in terms of pure man-power as well as technical expertise to help guide them to meet these new requirements. Although institutional investors may be abletoworkwiththefinanceorganisation within the portfolio company to help direct and set expectationsforthefinanceteam, these investors are often limited in their ability to allocate time to their portfolio companies. Furthermore, projects such as the conducting of due diligence to streamlining thefinancefunction,designingreporting decks or board reporting, and other aspects ofthefinanceoperationstransformation process may lie outside the core skill sets of the institutional investors. In a recent engagement, Accordion designed a new business metric tracking process and built a consistent reporting format from scratch to consolidate the daily and weekly operating metrics for a companys four global business units. The Head of the Private Equity Portfolio Operations group noted that Accordions KPI dashboard still sits on our company CEO and operating partners desk every single week. Moreover, from the perspective of the CFO or thefinanceteam,itmaybelessintimidating (and disruptive) to have an external counterparty working within the team who is available to coach and answer questions than working with

the sponsor directly during the transition period.

Furthermore, in companies that are evaluating growth opportunities (whether or not it has received funds from institutional investors), the CFOsfinanceorganisationmust operate as the foundation for the company to achieve its strategicobjectives.Thefinanceorganisation accomplishes this not only by providing clear reporting and benchmarking on a monthly basis but also throughvigorousfinancialanalysis to assess the impact of strategic alternatives. These types of analysis may include evaluation of expansion opportunities and the consequences of investment in capital projects, mergers, or raising debt or equity on the company. In addition, it is often truethatafinancialoperationsoverhaul is necessary to help thefinanceteamsupportthecompany as it continues to grow. Juggling all of these extra

for companies that are lacking themanpowerorspecificexpertise needed to address certainfinancialprocesses.However, Accordion provides a solution to this problem with consultants in Dubai and New York who can be tapped to advise or execute projects. Weve had a guy in Abu Dhabi for the last three months helping a portfolio company through a financetransformationprocess.This particular professional wasoutofourNewYorkofficeandhadthespecificexpertisenecessary. He was more than willing to come out for a few months. Individuals like him may have some reservations relocating to the region full time, yet are more than willing to step in a short-term basis, said Leopard.

Filling the Gap Acompanysfinancefunction,with the CFO as the captain, must manage the expectations of external institutional investors such as Private Equity Firms, Sovereign Wealth Funds, Family Offices,andotherinvestmentfunds both in the Middle Eastandabroad.Thefinanceorganisation must liaise upward to institutional investors, private equityfirms,sovereignwealthfunds, and other investors who will require robust reporting, cost analytics, a streamlined financefunction,andactionablestrategy plans that are supported byrobustfinancialanalysis.Once an institutional investor has capitalised a company, the CFOs of the company must work quickly to meet the demands of the companys new institutional owners above and beyond tackling the day-

Launched in Dubai in 2012, bringing experienced professionals from the US and around the MENA region to bridge short-ages in team bandwidth.

MARKET OUTLOOK

Accordion

As compa-nies within the GCC grow, it is important to develop the internal support mechanisms. Finance organisa-tions at these firms are expressing a desire to become world-class.

projects and analysis with day-to-day tasks can be a formidable task. To support all of these competingneeds,thefinanceteam may need assistance for a temporary period of time. A bolt-on execution team may helpthefinanceorganisationto streamline its operational processes, to evaluate and select new systems, and to provideexpertisefromfinanceprofessionals with experience in specificareassuchasevaluatingnew capital projects, fund raising, and expansion into new markets. Accordion recently completed an engagement for a major e-commerce retail company creating an operating model to automatically capture accounting system output and a valuation model to incorporate detailed revenue forecasting, bolt-on acquisitions, capital management, and long-range scenario planning. The CFO of the company noted that the operating model [Accordion] builtjustsavedthefinanceteam

several hours of manual updates each week and has given me consistent visibility into the [companys] operations.

Accordion helps to act as a partner to institutional investors and sponsors within the company to help execute on their 100-day plan which is often the most important period of any new investment. As part of thefirst100-dayplanforanewlyacquired private equity portfolio company, Accordion rebuilt the companys operating model from the ground-up, stress tested business driver assumptions, and created a KPI dashboard and robust board reporting package. The Vice President of the $17 billion private equity firmsaid,Accordionsskillsetwas unmatched for this portfolio projects needs, relative to traditionalconsultingfirms.

The model is more relevant than ever to the GCC region. As companies within the GCC grow, it is important to develop the internal support mechanisms. Finance organisationsatthesefirmsare expressing a desire to becomeworld-classfinanceorganisations. The talent and expertise may not be readily available to companies to meet this goal. Accordions results-oriented team allows clients to bring in short-term resources into the team and translate best-practices into action.

This year we installed an interim CFO for a company in the GCC region, explained Deval Dvivedi, a board member and Managing Director at Accordion International. The CFO of the group wanted to buildaworldclassfinanceorganisation and we were

asked to help put many of theprocessesandefficienciesin place to achieve this goal. Thefirstphaseofthisprojectincluded FP&A improvements and enhancing reporting efficienciestoallowtheseniormanagement to make actionable decisions to continue growing the company.

Long-term impact The role of the CFO and the financeorganisationsimportto the success of a company will continue to grow. Education will be paramount as institutional investment increases within the region and GCC companies expand into new markets and execute on their growth plans. Institutional investors andcompaniesneedtofindpartners who they can count on to build on this promise as the companiesgrow.Accordionfillsthe educational role by working withinthefinanceteamtocomplete this objective. Where we make the most impact is in situations where it may have been a family-run business that never had any experience with institutional investment.

Explained Leopard: we can come in for three to six months with an interim CFO and really drive change and professionalise thefinancefunction.Wecanmake this function a centre where the strategic decisions are made by driving more effective board discussions with business analytics and the reporting structure. Thats where we can be effective building architecture in three to six months to take the company to the next level. And after three to six months thats a proper transition time to go out andfindtherightfulltimehire.

MARKET OUTLOOK

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Accordion

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Qatar Financial CentreADVERTORIAL

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has two tax systems which run parallel the State Tax System covered by Law No.21 of 2009 and the supplementing Executive Regulations and the QFC Tax Regulations issued in 2010 and amended in June 18 2014. Our aim is to ensure the transparency of the QFCs tax rules and guidelines toexistingfirmsandfornewbusinesses setting up in the QFC.

The QFC tax regime is imposed on entities licensed within the QFC. The QFC is not a tax haven. It is a financialcentreinwhichcompaniesand businesses can operate onshore in Qatar, regionally and internationally. In developing its tax regime, the QFC has taken a unique approachcomparedtofinancialcentres in the region, adopting a low taxrateandatransparent,efficientadministrative process. Drawing on established features of other tax regimes, it is clear in its application and effect and straightforward in approach. The QFCs tax regime is among the most favourable in the

Sheikh Salman has a picture perfect view of Qatars booming economy and all which lies ahead as CFO and Director of Tax of the Qatar Financial Centre (QFC). Here he shares why the nation is one of the worlds finest countries to conduct business and just how the QFC is helping make this possible.

aN EXCuSivE Q&a wiTh ThE QaTar FiNaNCial CENTrES ShEiKh SalmaN

At the QFC, we recognise that Qatars ambitious public in-frastructure and human development projects require the support of a strong financial and business services en-vironment.

related matters, which is why he has also held the title of Director of Tax. The two roles complement each other well.

As Director of Tax, my key responsibilities include the effective operation of the QFC Tax regime, ensuring compliance by all QFC taxpayers and implementing the QFCs tax regulations key principles of fairness, transparency andefficiency.

Strategically, I continuously ensure that the QFC Tax regime is relevant to our increasingly globalised and competitive financiallandscape,andthattheQFC maintains its ability to attract internationalandlocalfirms.

What types of tax challenges do new businesses face when entering the Qatari market?Therearenospecifictaxchallengesfacing new businesses entering the Qatari market. In fact, we believe that the QFCs tax regime is one of the worlds most attractive. Qatar

How important is your role as CFO with respect to the QFCs activities?AsChiefFinancialOfficer,myroleincludesfinancialplanningforthe Qatar Financial Centre (QFC), budgeting,maintainingfinancialrecords, and reporting to the Chief ExecutiveOfficerandDeputyCEOregarding all matters related to QFCfinances.

Moreover, as a member of the Executive Committee, I contribute andprovidefinancialsupporttothe overall strategic initiatives implemented by the QFC. We work as a team, and share a determination to sustain the QFCs success. For me, this goal is more important that any individuals role.

How do you balance this role alongside your responsibilities as Director of Tax?Throughout the QFCs early stages, theChiefFinancialOfficerhasalways taken the lead on tax-

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Qatar Financial CentreADVERTORIAL

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role to play in developing a strong private sector in Qatar, which will contribute to the creation of jobs and encourage local and international investments in a diversifiedcompetitiveeconomy.

The QFC platform can now be utilised to support a variety of services that relate to Qatar hosting the 2022 FIFA World Cup including all types of consulting services, legal services, IT services, marketing and brand managementservices,PRfirms,advertising agencies, recruitment firms,andaccounting/auditfirmsto name a few.

Do you anticipate changes in the Qatari business landscape in the years ahead? If so, how is the QFC staying ahead of the curve?Yes, I believe that as Qatar is growing into a regional economic powerhouse, and its business landscape is consistently evolving. Qatar is opening up to the global economy and is continuously encouraging private enterprises, SMEs and youth entrepreneurs to enter the local market. These initiatives will prove instrumental in bringing the 2030 vision of economicdiversificationtofruition.

The QFC is also continuously updating and expanding the scope offirmsthatcanbelicensed.Wehave always prided ourselves in understanding the requirements and needs of the Qatari economy. As it has become increasingly diversified,wehaveadaptedourapproach in order to broaden the number of business sectors that we welcome.

We are well aware of both the local developments and the global contextandarebuildingaflexible,adaptable platform that can be the ideal platform to capitalise on the regional opportunity.

world, with a tax rate of just 10% onprofitsthataresourcedlocally.However, a number of exemptions and relief are available to encourage certain businesses to set up in the QFC. For example, wholly owned Qatari companies can now apply for the 0% concessionary tax rate. Moreover, there is no withholding tax on payments of interest, dividends, royalties and management fees to or from QFC entities.

In June of 2014, we introduced new tax regulations that would help Qatari-owned entities investing in Qatar by allowing them to opt for the zero-tax rate on their operations conducted from the QFC. This policy is in line with the governments aim of growing Qatars private sector.

In which ways is the QFC preparing for Qatars hosting of the World Cup?Qatar is fully committed to delivering on its promises in the

upcoming Qatar 2022 FIFA World Cup. However, Qatars plans for economicdiversificationandhumancapital growth pursuits are well enshrined in the Qatar 2030 Vision, which, in terms of magnitude, far outweighs the FIFA World Cup. In this sense, the tournament can be seen as a means to an end rather than an end in itself.

At present we are seeing substantial public infrastructure investment in diverse projects such as Lusail city, the Qatar Rail project, the new Hamad International Airport, the new Doha Port and Qatar Foundations Education City.

At the QFC, we recognise that Qatars ambitious public infrastructure and human development projects require the support of a strong financialandbusinessservicesenvironment. More than ever, as this infrastructure investment programme gathers momentum, Qatar needs to attract the necessary skills and expertise to ensure that economicgrowthanddiversificationremain sustainable.

The QFC is preparing for the Qatar 2022 FIFA World Cup and beyond by providing the necessary legal,regulatoryandfinancialsupport to local and international firms.TheQFChasanimportant

Sheikh Salman, Qatar Financial centre

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Proclad INTERVIEW

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Proclad, a global leader in oil & gas cladding solutions understands the importance of expanding as the businesses history is steeped development. Financial Controller Mark Downie explained to CFO Magazine how the firm entered the region and his role within ongoing activity related to M&A.

How did Proclad launch in the Middle East?Proclad Group is the world leader in the provision of Corrosion Resistant Alloy (CRA) cladding solutions for the Oil & Gas industry with manufacturing sites in the UK, the UAE and Singapore. The origins of the Group go back over 40 years since the original business started as a CNC machining subcontractor to the major Oil & Gas Original Equipment Manufacturers (OEMs). It was a natural progression to move into CRA cladding where Proclad established its name as the market leader in CRA cladding solutions and the Proclad brand became synonymous with quality, setting the global standard in the industry.

Proclads Middle East operation started in 1997 in Abu Dhabi. In 2010 a new holding company was created in DIFC, coinciding with theopeningofanewflagshipfacility for the Group in Dubai the largest single site CRA cladding facility in the world representing an investment of over $100m. Proclads Dubai facility continues to provide CRA cladding solutions for major Oil & Gas projects worldwide.

Has M&A played a role in the companys growth over the years?Proclads growth over the years has been achieved through a combination of organic growth as well as a number of acquisitions and the establishment of agreements/joint ventures with key strategic partners.Throughuseofspecifically

targeted, key acquisitions, Proclad

CONTrOllEDClaDDiNg

Group has successfully added and integrated a number of additional related operations which directly support the core CRA cladding activities which include induction bending, heat treatment and forging. This has given Proclad a distinct competitive edge in being able to offer a one stop shop for clad products.Nowthattheflagshipfacility

in Dubai has been set up and running successfully for over four years, with a record level of orders across its businesses worldwide, the focus has moved to future expansion plans in the Middle Eastandfurtherafield.

The Group remains open to further M&A transactions where there is an opportunity for synergy with the Groups existing activities, including further horizontal and vertical integration where we see an opportunity to add value and there is a goodculturalfitbetweenthebusinesses.

What drives Proclads desire to expand?Proclads M&A activity is driven by the opportunity to add value in the project supply chain, complimenting existing product offerings. From its initial beginnings as a cladding and machining sub-contractor, Proclad has become the turnkey pipeline solution provider of choice. This has been achieved through the investment in and continuous development of in-house technology and expertise teamed with targeted acquisition of businesses which increase Proclads share of the total

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ProcladINTERVIEW

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project value. Two examples of such strategic acquisitions are Proclad Induction Bending and Proclad International Forgings. All pipeline projects require bendsand(forged)fittingsandflangesandtodevelopthenecessary expertise organically, obtain necessary approvals etc would be prohibitively time consuming. Through making these acquisitions, Proclad has been able to better control our projects critical components, increase top line revenue and bottom line profitability,reducingtheneed for sub-contracting on projects as well as gaining new product lines to sell in their own right. This creates significantsynergywithinthe business related issues are more easily resolved and worked on in cooperation, logistics are centralized and there is one responsible management team. It also gives us the opportunity to roll out and replicate the acquired business expertise in other Proclad locations at a lower cost and limited risk. As Proclad is a quality driven, customer focused business, these are the key cultural values when considering any acquisition.

As Financial Controller, the financialimplicationsofanytransaction are of the highest importance to me be it the business plan assumptions,

initial capital funding, working capitalfinanceorROI/payback.However, the strategic advantage of an investment should not be overlooked and can offset the perceptionoflowerfinancialreturns where the risk of not investingisrealbutdifficulttoquantify.

How imperative is the bond between Financial Controller and CEO whilst working towards Proclads continued expansion?Having worked directly for the CEO for over 3 years, it has greatly helped our relationship that I have known him for more than 15 years. We meet most days but as 2 self-confessed insomniac, workaholics, we also communicate regularly with the office,oftenatoddtimesoftheday, particularly if one of us is travelling. There is a great deal of mutual respect and I believe it is essential that the CEO and Financial Controller are on the same page when considering expansion of the business. The CEOs role is to create the vision, my role it is to convert this into a prioritised, appropriately funded, deliverable plan. I could be described as a counterbalance to the CEO but I consider my role to be more of a facilitator to ensure that the CEOs vision becomes a reality. The role is certainly challenging, never dull and no two days are the same. With current plans for further worldwide expansion of the Group, I expect the next 3 years to be busy on the M&A front for Proclad.

Through acquisitions, Proclad has been able to better con-trol our pro-jects critical components.

Aldar MARKET OUTLOOK

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alDar ON ThE riSE

Asthefinancialcrisisof2008-2009 rippled through global markets causing unforeseen disruptions, the UAEs real estate market was thrown into disarray, with the mid-2000s boom quickly turning into a slump as buyers vanished and newly constructed towers were left desolate.Justfiveyearslater,the

property industry is back on its feet, with the major developers Aldar Properties and Emaar Properties prospering in their respective home markets of Abu Dhabi and Dubai.

The journey has not necessarily been smooth, with corporate restructuring and recapitalisation necessary for many real estate players. In Aldars case, the key to a brighter future lay in a successful merger with fellow Abu Dhabi developer Sorouh Real Estate, which was completed in mid-2013.

The combination created by far the preeminent property company in the Emirate, with assets of around US$12 billion and a land bank of 77 million square metres. AldarsChiefFinancialOfficer

Greg Fewer says as a result, the

Abu Dhabi-based real estate developer Aldar weathered the global financial storm of 2008-2009 to emerge stronger and primed for growth. In an exclusive discussion with CFO Magazine, Aldar Chief Financial Officer Greg Fewer speaks about the companys improved fortunes, a string of ratings upgrades, and his experience driving through a merger with Sorouh Real Estate in a rare case of major M&A activity in the Middle East.

As the Emirates bellwether developer, we value being large, strong and stable.

company is not only back in growth mode, but starting to launch and sell developments again. The company has the financialstrength,througha strong capital base and a significantstreamofstablerecurring revenues, to prosper through the business cycle.

We have land in all four corners of the Emirate, so when we see opportunities well have a plot of land close where we can activate product. As an investment-grade counterparty wedothismoreefficientlyandmore quickly, Fewer said.


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and Sorouh was instrumental in creating a stable and sustainable real estate industry and operating environment, Fewer said.

Since 2012, when the merger wasfirsttabled,rentalandcapital values in prime areas have stabilised and increased by as much as 25 percent.

The merger started with a lot of discussions and it was very public. The government of Abu Dhabi was an interested party and had invested a lot of capital in the sector in the form of asset transfers and infrastructure investment, Fewer offered.

As the Emirates bellwether developer, we value being large, strong and stable.

The climate was much different when Fewer joined Aldar in December 2011.

The company had accomplished much including building some of Abu Dhabis most recognisable landmarks, including the Yas Marina Formula One circuit, and its own coin-shapedofficebuildingthatpunctuates the main approach to the UAEs capital. But the heavy investment, particularly to establish Abu Dhabi as a

prime leisure destination, had taken its toll on the companys balance sheet, and the property market downturn was impacting revenues.

The recent history of the company had been about managing the debt pile of Aldar down, Fewer said. There was afinancialrestructuringandanorganisational restructuring in early 2012 and I joined around that time. This lasted for most of 2012 and then we started to organise a merger with Sorouh.

The Abu Dhabi government-blessed merger between Aldar

The Abu Dhabi government-blessed merger between Aldar and Sorouh was instrumental in creating a stable and sustainable real estate industry.

greg Fewer, cFo, aldar


Formula One Grand Prix in November.

Over the last 12 months, Aldar hassignificantlydeleveragedthe business, reduced its cost of borrowing and extended its debt maturityprofile.

Net debt to equity, excluding restricted cash, is now slightly lower than 40 percent, down from 65 percent a year ago, andAldarbenefitsfromjustover AED 4 billion in cash and bank balances. The companys annualised recurring income has grown to approximately AED 1 billion, from AED 420 million in 2013, and is on course to reach AED 1.6 billion annualised next year.

The company has had a strong thumbs up from the ratings agencies. Moodys and Standard & Poors have applied successive upgrades over the last year, and in the last month have both ranked Aldar as investment grade.

The logic behind the merger is proving true. Weve built a solid platform for growth that is strong, the merger was designed to create a foundation for the Abu Dhabi market, Fewer said. And were now positioned for the kind of progression which the market requires and deserved. We will sensibly monetise our 77 million square metre land bank by developing new products for the market, he added.

The merger accelerated our ability to deleverage. It balanced our recurring revenue portfolio, things that are very credit positive. Were very pleased to see the rating agencies acknowledge this. The rating agency upgrades demonstrate that we absolutely havethefinancialstrengthtoimplement our business plan in an unfettered way.

We all valued a stable real estate sector and made the observation that bringing these two companies together would bring some stability, strength and discipline to the market.

With strong consensus emerging at both Aldar and Sorouh and other key stakeholders in Abu Dhabi that a merger was desirable, the preparation process was driven by a working committee that included key executives from both companies, including Fewer. The committee organised early negotiations, as well as the due diligence and valuation processes.

Yet the management and board of each company also had a responsibility to put the interest oftheirownshareholdersfirst.

The CFO needs to be at ground zero for where information is coming to light and where the key negotiations are taking place because you need to form the recommendation aroundthefinancialsenseofthetransaction, Fewer said. Does it make sense for the shareholders? The answer to this needs to be expressedinafinancialway.AsCFO, youre ultimately the one who needs to do the assessment and make the determination, he added. The CFO needs to see thingsfirsthand,takelittleforgranted and be involved in key decision making.

The merger has turned out to be transformational, with the integration process achieving its aims within six months of the deals completion, and the company successfully launching three new residential projects in 2014, as well as opening its flagshipretailproperty,YasMall, days before the Abu Dhabi


77mAldar-Sorouhs post-merger land bank in square metres

STaT FaCTSThe CFO needs to be at ground zero for where information is coming to light. Does it make sense for the shareholders? The answer to this needs to be expressed in a financial way.

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AujanFEATURE

www.thecfome.com38

a FluiD parTNErShipThe Aujan Group made headlines in 2012 following the purchase by the Coca-Cola Company of approximately half of Aujans beverage business, a deal widely reported across the region. Group CFO, Dave Anderson, shares what goes into a merger of this size, what Aujan has planned for the years ahead and how vital the Chief Financial Officers role is in a fast changing organisation, such as Aujan Group.

AujanFEATURE

www.thecfome.com 39

In 2012 Aujan formed a JV with Coca-Cola when the latter made a $980 million investment for a 50 per cent stake in Aujans beverage portfolio to establish the Aujan Coca-Cola Bottling Company (ACCBC). The deal was initiated in 2006, and was completed after six years of preparation and analysis. The partnership became the largest investment in the Middle Eastern consumer packaged goods sector.

Said Anderson: Although we explored a variety of options to transform the beverage business, the Coca-Cola partnership provided compelling synergies. Coca- ola had a well-established global reach and was interested in strengthening its position in the Middle Eastern market. Aujan had a strong presence in the Middle East region within the wider juices beverage category and a strong portfolio of well established brands and was interested in a platform for global expansion. We also recognised fundamental similarities between our companies cultures and values. Overall we felt our companies were well suited to work together.

Entering its fourth year, the merger has proved the value of the long period of discussion and preparation. The deals six-year preparatory phase

Aujans partnership with Coca-Cola became the largest investment in the Mid-dle Eastern consumer packaged goods sector.

The Aujan Group has extended its reach across an array of industries since its founding more than a century ago. Once a Bahraini trading company, Aujan has survived the drawing of new regional borders, relocation and a number of key acquisitions across vastly different sectors. Today, Aujan Group is a diversified holding company, active in a wide range of industries, including FMCG, Hospitality & Real Estate, and Packaging Materials. The beverage business has been the companys flagship business throughout its history with the distribution of British fruit juice drink Vimto dating back to 1927 interrupted only by World War II. Fruit juice brand Rani later supplemented Aujans beverage lineup and today acts as the Groups flagship offering. Four years ago, the beverage portfolio was further complemented with Barbican non-alcoholic malt beverage products, following the completion of a progressive purchase of the global brand rights by Aujan. Existing as the embodiment of Aujans entrepreneurial flair, the combined portfolio reflects the spirit of the organisation, eliciting family values, creativity and the culture of the region.

After 85 years in the region, Vimto is synonymous with Ramadan, as the brand

focusing on bringing families together. Rani float is a range of flavored fruit juices with real fruit pieces tailored for Middle East consumer preferences. And finally Barbican is a non-alcoholic malt drink. So youve got three different perspectives which are very relevant to the Middle Eastern environment and culture, said Dave Anderson, Managing Director and Group CFO of Aujan Group Holding.

Thats the essence of our approach a deep connection to the region coupled with brand building on an international basis.

As Aujans beverage product range expanded and the business model shifted from a sales to a marketing orientation, the business was growing at about 20 per cent a year through the period from 2005 to 2011, meanwhile its geographical footprint also expanded beyon

the cfo middle east | issue 3

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