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Tue 7 Apr 2015 01:36 PM

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Gulf families not prepped for rigours of IPO - Mishal Kanoo

Head of Kanoo Group says local family businesses are avoiding IPO route because it is 'too painful'

Gulf families not prepped for rigours of IPO - Mishal Kanoo
“I think a lot of the families in the Gulf are not prepped for that.”

Gulf families are not willing to take their businesses public because it is too painful, Kanoo Group deputy chairman Mishal Kanoo told Arabian Business.

Few privately-owned Gulf businesses have launched an initial public offer (IPO) in recent years, particularly since the 2008-09 economic downturn.

Kanoo, whose six-generation-old conglomerate also has no plans for an IPO, said most Gulf families were not prepared for the uncompromising scrutiny that came with going public.

“I don’t think many families are actually prepared for the rigours of going public because it’s very painful,” he said in an exclusive interview published in the Arabian Business magazine this week. “The type of questions you could be asked, the type of interrogation you could get, especially at the AGMs, a lot of families are not prepared for that because they think no matter what, it’s my company, my name, I don’t like people asking me and questioning me about what I do, what I don’t do.”

IPOs were becoming reasonably common prior to the financial crisis but some families that took that path now regret it, Kanoo said.

“There was until one time a thought that this was the elixir that would solve everything, by going public and I think a few families quickly realised, if I could re-do it, I wouldn’t go public,” he said.

“Not because I have anything to hide, necessarily, but it’s just because the structure and governance that needs to go on sometimes is very rigid and you have oversight from the Ministry of Economy and sometimes from the regulatory body, and they can be very stressful to think about making sure that every quarter your information has to go out [and] you can’t buy your own shares within a certain timing.

“Because of those restrictions, it becomes a painful exercise.

“But some people are very happy with it, because it fits their mind set, they’re very regimented. Every family will look at it with a different point of view.

“I think a lot of the families in the Gulf are not prepped for that.”

PwC revealed last month 15 percent of family firms in the Middle East planned to sell all or part of their business in the short to medium term. Of those, only half would be via an IPO, while the others would hand-select private equity stakeholders.

More than a third (38 percent) of the 44 family businesses surveyed said they intended to keep operations entirely in family hands, while a quarter would pass on ownership to the younger generation but bring in professional management.

The Kanoo Group has recently hired its first outside executive staff members and is in the process of taking on its first non-relative CEO in a radical change from tradition.

However, Kanoo revealed even that step has caused rifts between some family members.

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