JEDDAH, 27 May 2004 — The number of enlisted companies on the Saudi stock market has reached 70 companies and their cumulative market value exceeds SR700 billion. Faisal Al-Sayrafi, president and CEO, Financial Transaction House, mentioned this during his presentation on “Capital needs and financing opportunities for family businesses” at the concluding session of the two-day Saudi Family Business Forum at Jeddah Hilton on Tuesday.
Many Saudi and international business leaders attended the conference, which focused on the future of family businesses in light of globalization challenges. MEED organized the event in cooperation with Jeddah Chamber of Commerce & Industry and Jeddah Marketing Board.
Al-Sayrafi discussed the optimal capital structure for family businesses and environmental changes affecting it. “New regulations, such as the new capital market law, will boost the securities market and attract new investments,” he said.
Al-Sayrafi introduced his topic by presenting the global nature of family businesses and said 33 percent of Fortune 500 companies and 75 percent of all companies in the industrialized world were family-owned, while this ratio was 90 percent in the Middle East.
He also discussed the outcome of the Kingdom’s accession to the World Trade Organization and its implications on family businesses. He presented several methods that family businesses can use to take full advantage of this accession and minimize its risks.
His recommendation to family businesses was to identify in which stage of their company’s life cycle they currently were and then to identify what their future goals were. “After family businesses identify where they are and where they want to go, they should consider different financing options available to achieve these goals after having taken into consideration different issues such as growth strategies, cost of capital, leverage ratios and their ability to fulfill their commitments.
He pointed out the importance of studying the company’s borrowing strategy and the negotiations of terms in the initial stages of borrowing to acquire the optimal loan conditions in line with its operations.
“Since 1994, we’ve developed a significant expertise on addressing issues related to family owned businesses, helping them tackle the challenges they face in an increasingly global and competitive environment,” said Al-Sayrafi who has over 25 years of corporate finance advisory and industry experience.
Describing the forum as a welcome step to discuss issues of family businesses in the context of globalization and WTO, David Gibson-Moore, general manager and senior vice president of Bahrain-based ROBECO Asset Management, said: “Such forums are good for exchanging ideas.” Many presentations given at the forum reflect that challenges facing family business worldwide are similar here, he told Arab News.
“Things will change here as they have changed so far,” he said, adding that one of the features of local family businesses is that company names remain the same, while the size of families owning them continue to expand creating governance issue.
“One other feature is that while brothers involved in family businesses in countries in the East and the Far East are located in different parts of the world, Saudi family businesses show that all brothers running them are locally based.”