Middle East opportunities and optimism persist despite sharp fall in business confidence, Norton Rose report

Respondents

The report, CEO Briefing 2009, is based on a survey of 925 CEOs and C-level executives worldwide conducted by the Economist Intelligence Unit in November 2008 following the financial turmoil that unfolded in September 2008.

The aggregate annual turnover of respondents' businesses is in excess of $2000bn. 24% of respondents were from the MENA region. The results make comparisons with the last CEO Briefing study which was conducted in 2007.

Prospects for 2009 - optimism remains despite a steep fall in business confidence

Chief executives in the higher growth MENA region are amongst the most confident in the world, with nearly three-quarters (73%) of the surveyed companies believing their business will do well this year. Just 10% have a negative outlook. These optimistic figures compare with 55% for the rest of the world and 45% for Western Europe.

M&A - opportunities still exist despite steep fall in business confidence

Fifty per cent of MENA respondents plan to do at least one deal in 2009, signalling that a number of companies are planning to take advantage of the market environment to expand their business. The survey results highlight that liquidity in the MENA region is a factor paving the way for M&A in the region. Twenty three per cent said they would fund these acquisitions through stocks and shares, 14% through private equity and 13% by cash. Only 8% were expecting to make an acquisition with secured debt and 5% with unsecured debt.

Inward looking investment

60% of CEOs based in the MENA region see the region as having the greatest opportunities for them in terms of investment growth in the next 12 months. Asia Pacific was viewed as the next most attractive region. However, MENA executives also believe the region holds the greatest operational risk (35%) and the second highest financial risk (21%) after North America (42%) for their business.

Challenges for 2009 - risk management and retaining talent

When M&A activity does restart, the survey indicates a considerably greater degree of responsibility attached to the process - with a greater focus on risk management and governance than has previously been the case - 35% of respondents indicating risk management as their greatest challenge for running a successful company for 2009.

Raising capital and the search for talent also feature highly throughout the findings for MENA-based CEOs, with 27% believing the difficulty of attracting and retaining talent is the greatest risk their company will face over the next 12 months.

Streamlining and cost cutting

MENA CEOs say a focus on costs rather than top line growth is their focus for 2009. Over half of MENA companies expect to conserve cash by streamlining internal processes. 27% have indicated they will be looking to outsource as a way of conserving cash.

Campbell Steedman, International Managing Partner, UAE commented:

"It has become apparent that since November 2008, the MENA region, while still anticipating growth in certain parts, has been more adversely affected by the international financial crisis than was originally anticipated. That said, the sentiments expressed in the survey reflect a cautious optimism in the region and an expectation of continued deal flow."