Many people dream of quitting the daily grind and becoming an entrepreneur. In fact, a survey last year by online recruitment website Bayt.com found that 60 percent of employees surveyed in the Middle East said they are thinking of starting their own business.
But, there is a big difference between those who talk about it and those who take the chance, as the survey also revealed that only 17 percent of respondents actually quit and followed through on their ambition to set up on their own.
One Dubai expat who made the leap of faith was Trefor Murphy. The Irishman arrived in Dubai in 2012 to lead the Middle East division of international recruitment company Morgan McKinley.
Clearly a member of the 17 percent club outlined in the Bayt.com survey, Murphy decided a management buyout was what lay in his future. On the initial approach, his bosses turned him down, but when economic conditions changed in mid-2015, they were suddenly in the mood to talk.
“I think it was a combination of Morgan McKinley - an international firm with a very large corporate footprint around the world - they kind of had enough of the region. And me having enough of working for an organisation and wanting to make that step,” Murphy recalls. “So, it was a combination of two events happening that led to an opportunity… And I jumped at it.”
One of the major stumbling blocks Murphy faced early on was a lack of support from the local financial community. “It was very interesting. Morgan McKinley had been in the region since 1997. So when I bought it in 2016 it’d been trading in the region for a very, very long time. We had talked to one international bank for that full period of time and they’d seen the books and our numbers were quite reasonable.
“We had a 20-person team out here, but when I went to [the bank] and said ‘I’m going to buy that book of business and here’s our projections based on where the business sits, all the team is coming across and there will be no cessation of services provided’, the woman actually sniggered when I mentioned an overdraft.”
Murphy recalls the woman in the unnamed bank told him to go away, trade for two years and then come back and the lender might then consider giving him a bank account, let alone an overdraft.
“Three years into the journey, we still don’t have a business bank account. And there is no appetite to support SMEs in the region, in a start-up capacity,” he claims. “So, I had to self-fund by doing many things I didn’t expect to do. I didn’t actually re-mortgage my Dad’s house but I did look at it for a period of time.”
With a lack of corporate financing available, Murphy used equity he had in Morgan McKinley to finance the management buyout, with the rest coming from his own personal funds. “The appetite from the financial services market in Dubai to support an organisation with business rolling in is frightening. What that would look like for a start-up, I’ve no idea.”
Three years down the line, the former Middle East division of Morgan McKinley has been rebranded as Cooper Fitch and Murphy has seen tremendous success as its new CEO.
“I guess we’re still trying to figure out what that ‘made it’ would look like. So we’ve had a 147 percent growth in three years, in revenue, and we have doubled our headcount in the region. So, I guess, we’ve had some success.
“Anyone that’s grown any kind of business themselves, you know, the mindset shifts significantly when the first thing you need to do every morning is check how much you have in your bank account. Can you pay your bills? Can you pay your staff? For the most part, that’s been the success, but there continues to be challenges on a daily basis.”
Looking ahead, Murphy is aiming to capitalise on the success, and once the non-compete clause of the buyout expires, he plans to expand further afield. “We are in the final stages of opening an office in Riyadh. It is a necessity for us to grow our business. I still have a non-compete [clause] for another 10 or 11 months, not to operate in Ireland or the UK. As soon as that is up, we will put an office in Dublin and possibly outside London.”R
Murphy’s case is a rare one in the Middle East, with the transient expat lifestyle in the region making management buyouts quite rare.
“A lot of management are expats, so it’s very hard for a lot of management to think long-term about acquiring a business,” says Lee McMahon, co-founder of Dubai-based law firm Support Legal. However, McMahon points out that a lack of financial support for expats remains the big barrier to those looking to make the jump.
“You can’t go to any bank here and say, ‘hi, I’d like to buy part of a business and I’m a manager’. Banks will not entertain that,” McMahon says. “In other parts of the world, when you’re doing management buyouts, and you come with some of your own cash, you can actually go to a bank and raise money to fund the other half.”
Regardless of the financial obstacles, McMahon is seeing a growing trend for managers to take equity stakes in their employers. “We are seeing a lot of freeing up of equity in companies… We see a lot of expat people who have had businesses here for 10, 15, 20 years and they ultimately want to retire and leave the UAE. What are their options? They either start paying their management more money, and give them bonuses to try and ensure the success of the business, or, alternatively, they start saying ‘we’ll let them [management] buy a 25 percent stake in the business’.”
Despite the challenges, Murphy says he would certainly do it all over again: “I still jump out to bed and it’s still very exciting. I should have done it 20 years ago.”For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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