Recovery set to trigger M&A activity

The region remains a fast-growing market for Bain & Company Middle East, the regional arm of the global business consulting firm, says its Middle East head James Hadley. Mergers and acquisitions (M&A) and private equity activities in the Middle East have seen a slowdown in terms of the volume and value. However, as the global and regional economic recovery gets fully underway during 2010, it is natural to expect a bounce back in regional M&A activities, said Hadley. "The Middle East remains a significant growth market and a global priority for us. Our business is based on a long-term focus on the GCC, with particular emphasis on the UAE," he said. 

What are the major issues that deserve more attention in the region's corporate sector?

In the short-term perspective, issues such as liquidity, cash flow management, investor expectations and talent shortage will remain important topics. Further, issues like transparency, corporate governance and succession are the ones that companies in the region have been grappling with for a long time, and there has been a great improvement on these issues.

One of the major trends is a push towards achieving greater impacts and results from consultants – that means, the ability of consultants to help clients deliver greater impact and results by bringing their expertise in an integrated way across many sectors and capabilities – rather than just being experts on limited topics or sectors – is going to be one of the most important determinants.

M&As and private equity deals have reduced greatly in the region compared to pre-downturn years. Are there still opportunities in these sectors?

Absolutely. M&As are highly cyclical in nature. However, as the global and regional economic recovery gets fully underway during 2010, it is natural to expect a bounce back in M&A activity. We have already started seeing signs of life in these sectors. The economic growth in the region, combined with the need of many businesses to focus more on their activities, would lead to substantial M&A activity during the next couple of years. Overall, we are seeing much more behind-the-scenes M&As and private equity activity now than we did three to six months ago.

In the UAE market, which sectors are seeing more such activities?

Real M&A and private equity deals are hard to spot in the UAE, because there have not been a lot of such activities recently. However, looking at the strategic fundamentals, we can expect more investment and M&A activity in sectors such as infrastructure. One can also expect some restructuring in the real estate sector, where assets will change hands and there will be consolidation as well as exit of weaker players. Growth capital investment in smaller companies is going to be another area where one can expect activities.

Which are the broad issues on which your consulting services are sought?

The consulting market in the region has grown very fast in the past five years, prompting substantial investments by almost all major consulting firms in the region, including in the UAE.

With the increasing number of choices that the clients have in terms of selecting consultants, we are now seeing a much higher emphasis on the quality of services offered and much higher demand for results or impact from clients.

Clients are now more discerning and are now demanding a substantial return in value on the investment in fees paid to consulting firms. We are also seeing much more demand from our clients on how to make them sustainably viable, ranging from building up effective processes to an effective IT platform.

Is capital constraint a major issue preventing them from going for M&As or expanding their businesses?

I believe liquidity and capital constraint are certainly a problem for some companies. But again, it is quite hard to generalise, as much depends on individual companies, the sectors they are in, their strategic ambitions and their financial positions. Having said that, financial constraint will certainly stop some companies from investing in growth, either organically or through M&A. However, companies with stronger financial capabilities are waiting for the right targets and the right moment.

Which is the fastest growing market for you in the region, and what is the importance of the UAE in your global business?

The trends in the UAE we are seeing are reflected broadly across the Middle East. In all the markets where we are present, we are experiencing similar growth rate year on year. In the case of the UAE, we've seen revenue growing by more than 50 per cent in the first quarter of this year, compared to the same period last year, making it one of the fastest growing markets for us in the entire Middle East.

In the UAE, which are the services more in demand from your clients?

The diversity of demand is increasing quite substantially. The main sectors [in which] we are advising companies in the region are private equity, financial services, oil and gas, public sector, particularly on issues relating to economic and social development, private holdings, consumer goods and retail, telecom, media and technology sectors.

PROFILE: James Hadley Managing Director, Bain & Company Middle East

Hadley has over 12 years of consulting experience across all aspects of strategy, performance improvement and organisation in a wide range of industries. He is a leading member of Bain's Global Strategy Practice as well as the Emea telecoms, media and technology practice.

Hadley joined the firm in 1996 in London and was elected to the partnership in 2004. He has worked in a number of different offices in Europe and North America before moving to the Middle East as managing director in late 2008.

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