Complex Made Simple

Exit planning and M&A priority for GCC businesses”: Expert

Specialist corporate finance firm Lumina Capital Advisers Ltd, which provides services related to M&A (mergers and acquisitions), equity capital, debt advisory and infrastructure project financing under a Category 4 license, recently announced its move to the Dubai International Financial Centre (DIFC).

Following the announcement, George Traub, Founder and Managing Partner of Lumina, said: “Dubai is home to a multitude of business owners who may be unaware of the corporate finance and M&A opportunities available to them. Too often, business owners approach us after their company has passed its growth phase. This often leads to what we refer to as a ‘valuation gap’.”

Lumina defines the ‘valuation gap’ as the perceived value difference between buyer and seller or investor and company.

Exit this way

According to the firm, owner-managers rarely plan their exit and typically consider selling their business when it requires a step change in the investment cycle.

This often leads to an enhanced level of capital requirement and risk from a purchaser’s perspective and hence a lower valuation. The valuation gap significantly reduces the chance of executing a successful deal.

From Lumina’s experience, most successful M&A activity for owner-managed businesses occur when the business is eight to 12 years old.

Lumina has closed five transactions on complex deals for owner-managed businesses, worth more than $150 million, including the successful deal closing of DIFC-based Total Solutions Middle East’s (TSME) sale to Vistra, a leading corporate service providers.

In a recent Q&A with founder George Traub, AMEinfo inquired about the strategic move to DIFC and how the company plans to compete in its segment.

1- How does Lumina plan to compete in the highly competitive financial advisory market in UAE?

Our key differentiator is that we are specifically designed to offer senior-level advice direct to shareholders and owners of mid-market entities. There are many local and expat owner-managed businesses in the region, ranging from those worth $10m, up to those in excess of $100m and many of these companies are now reaching a stage of maturity where succession planning and exit planning are becoming a priority.

They’ve spent many years building their business and they want to ensure that they are getting the best possible advice, not only from a transaction perspective, but the perspective of the issues that matter to them such as the welfare of the employees, the business and their personal objectives post sale.

3- Where is the potential (for types of advisory services) going to come from in the GCC and why?  

In the GCC region, as the corporate and legislative infrastructure continue to become more sophisticated and companies adopt M&A as a key part of their strategy, both in terms of acquiring businesses and divesting non-core assets, the demand for private company M&A will continue to grow rapidly.

In addition, as many expat-owned businesses seek exits due to retirement or shareholders returning to their home countries, exit planning and M&A become a priority.

4- Which sectors are advisory services needed for in the GCC and why? 

All sectors really, especially where there are enhanced levels of legislative and government-led change, particularly in the healthcare, education and infrastructure/construction sectors.

We expect that many businesses will be assessing the strategic impact on their overall strategies, funding profile and business focus areas for the future – when this impetus happens, it is generally a precursor to considering M&A and appropriate funding solutions for the business.