64
A FAMILY AFFAIR
LISTING LOCATION
Companies choose a listing venue for a
variety of reasons. For instance a company
may seek a location that offers high
visibility to investors who are likely to invest
in its stock. L’azurde’s primary operations
are in the Middle East. Thus, investors
based in the region are the most likely to
know about the company and its products.
In addition to product and strategy
considerations, companies should
evaluate listing costs and standards as
well as compliance regulations for listing
on an exchange. It perhaps makes the
most sense to list on exchanges where
compliance standards are optimal. Finally,
it also makes sense for companies to
consider which exchanges provide
appropriate visibility and analyst coverage
for a company’s sector and nationality.
EMB
One-on-one meetings were also held with
various investors, where Chidiac and his
team could answer specific questions and
elaborate on the company.
Building the books: In a book-built IPO,
such as the one that L’azurde went
through, the underwriter obtains expres-
sions of interest from various investors
during or after the roadshow process.
The underwriter then develops a “book”
of expressions of interest, which is used
to price the IPO shares.
prior investors selling their shares
immediately after the listing. In Saudi
Arabia, IPOs have a lockup of one year.
However, even after one year, the regulator
must approve sales by certain insiders.
Management tasks change after
a company issues an IPO. While a private
company does not have to worry about
periodic reporting, unless the investor
requires it, public firms are obliged to
report quarterly earnings. On this count,
L’azurde continues to be ahead of the
game in Saudi Arabia. Each announce-
ment by the firm is accompanied by
a conference call held to answer any
questions. According to the CEO, “Maybe
three to four companies out of the 170
listed in Saudi Arabia do investor calls.”
THE IPO PROCESS
MANAGING THE TRANSITION
1. Take time to appoint the
right CEO; someone who
has managed turnarounds/
transitions, or who’s
experienced in leading
large organizations.
6. Transitions take time.
Giving incoming managers
leeway can go a long way
towards making the
transition fruitful.
Approvals: In their Saudi Arabian IPO
experience, L’azurde had to go through
six months of financial and legal due
diligence and two months for the regulato-
ry approval, involving multiple revisions.
Finally, there was a public announcement
of approval by the regulator.
5. Family-owned
businesses will need
to accept that the
person coming in will
think differently.
Awareness: L’azurde followed this
announcement with a major roadshow,
which included more than 200 investors
in Riyadh. The roadshow included the
management, alongsid e the underwriters,
who presented an array of financial and
strategic information about the company.
EMERGING MARKETS BUSINESS
SUMMER 2017
ISSUE NO. 3
LEADERSHIP IN FOCUS
AFTER THE IPO
Lockup provisions: Existing shareholders
are important too. A central feature of
IPOs is the lockup provision, which
requires pre-IPO investors to hold on to
part or all of their shares for a certain
amount of time after the IPO. This is done
to avoid the potentially damaging image of
Due diligence: L’azurde appointed global
firms like PricewaterhouseCoopers (PwC)
for financial due diligence, White & Case
for legal due diligence, and Saudi Fransi
Capital, a subsidiary of Credit Agricole
with Saudi experience, to support their IPO
process. According to Chidiac, the criteria
used to pick the underwriting group were
team experience, qualifications, fees and
whether the firm was global—something
which investors find reassuring.
IPO underwriters are a very important
part of the process. They conduct due
diligence and help price and resell the IPO
shares. In most public listings in the West,
underwriters also provide post-IPO initial
market-making services as well as analyst
coverage support—services which were
all but absent in L’azurde’s case.
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2. Once you hire a CEO,
secure adequate
support for him/her
from the board and
shareholders.
3. Consider the
implications of
professionalization on
all the stakeholders.
4. Value enhancements
such as increased
transparency depend on
the incoming
management and will
only happen over time.
1. Cultural and Contextual
Understanding
In accounting for L’azurde’s
successful transition from family-
owned business to publicly-listed
company, Chidiac points to the
leadership capabilities that he
developed in different contexts
and cultures around the world.
“My experience in Japan gave me
a lot. I learned how to listen, and
even how to sit and stand,”
he explains, adding that his role
in the turnaround of Red Bull
North America was also
invaluable experience.
2. No Substitute for Experience
It is important to get an
experienced leader in the job.
That means more than just
hiring for industry expertise.
Strong leaders can motivate
and get the most out of people,
while distinguishing between
the need for motivation and the
need for change.
3. Ambiguity and Acceptance
An important part of leadership is
the ability to deal with ambiguity.
In emerging markets where
nothing is black or white, you need
to recognize that people need time
to make decisions. Also, as Chidiac
says, “broadly, you need to accept
things that you would not accept
in the US or Europe. ‘Accept putting
water in your wine!’”
L’AZURDE
Locations: Saudi Arabia,
UAE, Egypt, Qatar
Stock exchange: Tadawul,
Saudi Arabia
4. Zoom Control
Another aspect of working in
emerging countries is that one
should be able to zoom in and out.
This means developing big picture
strategy while also being ready to
roll up your sleeves to help people.
It is important to utilize the skills
that are available and to not be
arrogant. In emerging markets
there are limited people with
skillsets that may need developing.
5. Managing the Transition
Take your time to appoint the right
CEO; someone who has managed
turnarounds and transitions,
or who is experienced in leading
large organizations with complex
governance issues.
Once you hire a CEO, secure
adequate support for him or her
from the board and shareholders.
Consider the implications that
professionalization could have
on all the stakeholders.
Value enhancements such as
increased transparency depend
on the incoming management and
will only happen over time.
Family-owned businesses will need
to accept that the person coming in
will think differently. That is not an
easy transition and expectations
need to be correctly set.
Transitions may take time.
Giving incoming managers some
leeway can go a long way towards
making the transition a fruitful one.
Chairman: Mohammed
Ebrahim Juma Al Shroogi
Operating Revenues 2016:
405 million SAR (almost
US$108 million)
Profit Margins:
Gross profit margin – 60%
Net income margin – 17.8%
Employees: 2500 +
IPO Date: June 5, 2016
IPO Price: 37 SAR (approx
US$10)
Percentage of Total
Shares Offered in IPO: 30%
KARTHIK KRISHNAN
is Associate Professor
of Finance and Thomas
Moore Faculty Fellow at
Northeastern University’s
D’Amore-McKim
School of Business.
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