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Public listing attracts family businesses in the Middle East

Family-owned businesses in the Middle East are renowned for being private but, according to a new study, a majority want to list on the region's stock exchanges.

As reported in Emirate Business, over 20% are already planning to go down the IPO route, while a further 30% intend to do so in the future.

Rami Nizzar, of Saudi Arabia based Arnest Wing who conducted the study, said those who have yet to start formal planning are holding back in order to keep hold of their fortunes.

The study revealed that the area's family-owned businesses control 90% of commercial activities in sectors such as garments, foodstuff, consumer products, automobiles and aviation.

Fifty per cent of family companies achieve at least $100 million and 17% achieve at least $500 million in annual profits in the region. Nizzar said they had proved their strength by adapting to international economic trends and had entered new areas such as telecoms.

However, the reason for the move to the stock exchanges is out of necessity rather than choice. This is because the third generation of families are threatening the future of businesses through worse managerial performance and a tendency to waste the big fortunes ammassed by their fathers and grandfathers.

"The third generation represents 20% of the heads of firms, while the first generation represents 48%. And there is even a concern about the perceived erosion between the first and the second generation," said Nizzar

"The rise of the third generation means the degradation of the companies' performances, and saving them would only be to possible by converting them into listed companies and separating owners and management."

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