Rick Pudner Talks to Thomson Reuters about UK/Mid East Cross-Border Opportunities Post-Brexit
How has Lumina's UK operation developed since your role was announced in March this year?
Lumina's message to the UK corporates is clear - experienced, hands-on, transaction advice from a senior UK team based in the Middle East with over 50+ years of combined local experience. Whilst the market for UK companies transacting nationally and in Europe is highly developed, this is far less prominent when it comes to quality cross border advice for the UK to/from the Mid East. Lumina's London presence is intended to provide the linkage to UK parent companies with respect to their Mid-East business interests and transactions. We continue to strengthen our ties with Mid East family offices based in London, UK corporates, UK government departments such as the Department of International Trade (formerly UKTI) as well as capital and trade associations like the BVCA and Saudi British Business Group, to name a few.
The UK and UAE have historic ties - what is the current market like for UK businesses entering or expanding in the UAE?
Whilst historic ties between the Mid-East and the UK date back centuries for trade and investment, the region is very much still developing, or even frontier market from a corporate and transactional perspective. When it comes to M&A, institutional capital transactions, many of the financial and legislative infrastructure aspects that are often taken for granted in the UK, can be vastly different, and in many cases absent. This often poses new challenges for the "HQ" back at base in assessing and structuring transactions. Having access to real-time, boots on the ground experience, is essential for any UK business looking to enter or transact in the Mid-East market, to ensure that the key financial and operational risks are understood, planned for, and mitigated in a practical and executable way, and the costs and time associated with implementation are optimised.
What kind of companies typically look at entering the UAE market from the UK?
Priority sectors across healthcare, education, technology and social infrastructure are underserved with significant growth potential. The UK's leading position in these areas makes a compelling case for cross-border partnerships into the Middle East.
Focussed conglomerates and Government entities seek experienced partners to import technology and know-how transfer into the region as a strategic priority. Technology and skills transfer present immediate opportunities for the UK knowledge-based sector.
Privatisation of infrastructure, power and utilities sectors are creating institutionalised opportunities for experienced UK project financiers and operators.
What kind of effect is Brexit set to have on mid-market and private companies operating in the ME markets?
Given the uncertainty on the terms of any Brexit deal at this time, its difficult to quantify specific impacts - regardless of Brexit, the UK is one of the largest trading partners of the UAE, and boasts a significant UK business element both in terms of companies operating in the region, and British nationals working and living in the region.
We have seen significant efforts on the part of the UK Government in strengthening these bilateral ties and trading relationships with the Middle East, such as the DIT and UK Export Finance backed by the government. This is set to accelerate and mid-market and private companies in the UK are beginning to re-assess their legacy strategies and operations in relation to these government initiatives - specific trading impacts will become clearer over the coming months.
Will you be advising UAE companies that wish to enter the UK market?
At this stage our focus is on enabling UK companies to navigate and transact in the Middle East and on cross border regional transactions across UAE, KSA and the wider Middle East.
In terms of outbound from the Middle East, we focus on facilitating Middle East capital into UK based transactions, and for the specific UK advice we would work in conjunction with experienced investment banks and mid-market advisers who would be better placed to advise on UK transactions.
What are your key areas of focus for the rest of the year, moving into Q1 2019?
Given the current soft transactional and capital market in the Mid East region, we are witnessing increasing restructuring and re-financings particularly in the construction, contracting and industrial sectors, from both corporates and banks/financial institutions.
Groups are examining more innovative ways in which to streamline their balance sheets including securitisation of real assets, spin-offs of non-core divisions and a more efficient approach to the use of group capital resources.
We expect to see an increase in structured finance products such as REITs, and more innovative M&A structures such as MBOs (Management Buyouts). Sources of capital for these transactions are also becoming more discerning, particularly traditional private equity and bank lending is set to become less "vanilla" - a lot more thought, expertise and governance/transparency will be set into deals in the next 12-18 months. We expect this will lead to better quality and more sustainable investments in the medium term.
Our publication "Investment Landscape in the Middle East - A distinct perspective" examines the key themes, and what these mean for UK companies.