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تجربة العمل في أكثر من 16 مجلس إدارة مع محمد السرحان | بودكاست سوالف بزنس

إذاعة ثمانية・92 minutes read

The family company faces restructuring after potential partners from "Danone" didn't want cows, leading to a merger aimed at introducing new dairy products to the Middle East market through separating Al-Safi into two companies. Financial advisors and legal experts evaluated the merger, resulting in successful new product launches and the evolution of initial merger structures.

Insights

Family companies can face challenges when the founder holds multiple key roles, affecting decision-making processes and creating potential embarrassment.
Mergers and acquisitions provide opportunities for rapid growth but require careful evaluation, integration, and alignment of operations to be successful.
Board members play a crucial role in overseeing company performance, with independent members chosen for their expertise to ensure effective governance.
Transparency, disclosure of conflicts of interest, and alignment of CEO incentives with board goals are essential for maintaining trust, efficiency, and success within a company's governance structure.

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Recent questions

What is the purpose of mergers and acquisitions?
Growth through combining companies for increased sales and market.
How do companies ensure successful post-merger integration?
Aligning departments, brands, and cultures while maintaining brand identity.
What role do boards of directors play in company governance?
Regulating relationships, setting strategy, and ensuring growth vision.
Why is transparency important in mergers and acquisitions?
To avoid issues like failed mergers due to hidden motives.
What are the responsibilities of board members in a company?
Monitoring CEO performance, disclosing conflicts, and ensuring company growth.

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Summary

00:00

"Merger of Al-Safi and Danone Success"

The family company faces embarrassment as the founder is both the Chairman of the Board of Directors and the CEO, while the son's company, "Danone," worth 16 billion euros, doesn't own any cows.
The family company had close to 50 thousand cows, but the potential partners from "Danone" didn't want cows, leading to a restructuring of the company's ownership and operations.
Being a member of multiple boards can equate to the income of a medium-sized company's CEO.
Abu Wael Muhammad Al-Sarhan, with over forty years of experience, is the Chairman of the Board of Directors of Caterion Catering and the Al-Bahri Group, having been involved in mergers and acquisitions with IKEA and Al-Safi Danone.
The merger between Al-Safi and Danone aimed to introduce new dairy products to the Middle East market, leveraging Danone's global presence and Al-Safi's local expertise.
The merger involved separating Al-Safi into two companies, one for raw milk production and the other for manufacturing, distribution, and branding, to align with Danone's business model.
Financial advisors and legal experts were employed to evaluate the company for the merger, marking the first foreign capital investment in the Kingdom's agricultural sector.
The initial merger structure evolved over time, with Danone eventually becoming the majority owner of the merged company, leading to successful product launches like "Danette" and "Danao."
"Danao," a juice-milk blend, revolutionized the market, offering health benefits and nutritional value, despite initial skepticism from consumers.
Market studies were conducted to ensure the acceptance of the new products by the Saudi consumer base.

15:35

"Danao Success: Global Expansion and Mergers"

The success of the product "Danao" was achieved after extensive studies, focus groups, and tastings in about forty-six countries.
The founder experimented with mixtures for years before launching the successful product.
The Guinness Encyclopedia listed "Danao" before the partnership with "Danone" was established.
The founder aimed to prove that their dairy farm was the largest globally, starting with the Gulf, then expanding to Europe.
A visit to the "Tetra Pak" company in Sweden sparked the idea of verifying the farm's size through Guinness.
The process of verifying the farm's size took over a year, involving data collection and cooperation with ministries and commercial annexes.
Mergers and acquisitions are means of inorganic growth, allowing companies to quickly increase sales and customer base.
The dairy sector witnessed mergers as smaller entities were unable to compete with larger companies like "Almarai" and "Al Safi."
Post-merger integration involves aligning departments and brands of merged companies, often facing challenges due to ego and brand dominance.
Private equity funds and sovereign funds are active in acquisitions and mergers, aiming to develop companies and increase market value.

32:31

Navigating Mergers and Acquisitions: Key Considerations

Acquiring companies can be easier when some buyers are interested in specific aspects like employees, customer base, or certain products, discarding the rest.
Integrating companies post-merger is challenging due to merging different administrative cultures and the need to close similar departments.
Selecting the best employees from both companies is a complex process during mergers.
Evaluating companies before merging is crucial, as differing valuations can hinder successful mergers.
Maintaining a particular brand identity can be vital, especially when companies operate in the same sector, considering consumer preferences.
A letter of intent is a crucial document signed by parties intending to merge, outlining goals, management methods, and board structures.
The failure of the merger between "Al-Safi" and "Nadec" was due to disagreements among owners, particularly regarding the name and ownership structure.
A successful acquisition example is "Bahri" acquiring the oil transportation sector from "Vela," enhancing value through asset evaluation and business integration.
"Aramco" acquired 20% of "Bahri" in exchange for the oil transportation assets, showcasing a successful acquisition story.
Transparency in mergers is essential to avoid issues like the failed merger between "Al-Faisaliah" and an Italian retail company, where hidden profit motives led to failure and legal disputes.

49:07

Global M&A Trends and Board Governance Insights

In Italy, products from countries like Sri Lanka, China, and India are sold at higher prices after being bought from suppliers at lower prices, often involving document forgery.
Mergers and acquisitions are more active in advanced economies globally, but post-COVID, there is increased activity in the Middle East, particularly in Saudi Arabia, the UAE, and Egypt, due to private equity funds.
Major international companies have specialized teams for mergers and acquisitions, unlike local companies that may lack expertise, often relying on think tanks and investment banks for evaluations and contracts.
LVMH, formed from the merger of Louis Vuitton and Moët Hennessy, owns brands like Dior, Fendi, and Givenchy, showcasing growth through mergers and acquisitions.
Boards of directors serve to regulate relationships between company owners and management, ensuring a clear vision and strategy for the company's growth.
The ideal number of board members today is seven to nine, with 50% being independent members, chosen for their expertise rather than ownership or management ties.
The Audit Committee oversees internal audits and financial integrity, while the Nominations and Compensation Committee focuses on management appointments, salaries, bonuses, and recruitment.
The Nominations and Compensation Committee plays a crucial role in attracting and retaining top talent, ensuring proper selection, empowerment, and motivation of employees.
Boards of directors periodically review company performance and strategic plans, ensuring high-quality executive management and proper reporting structures.
Committees like sustainability, executive/strategic, risk, and investment are essential for specialized oversight, with a growing emphasis on social responsibility and sustainability reporting.

01:05:26

Corporate Governance: Maximizing Investments and Social Responsibility

Companies have a responsibility to maximize owners' investments and contribute to society and sustainability.
Banking sector is pressured to invest in social and environmental issues despite focusing on profits.
Developed markets require companies to issue periodic reports on social and environmental impact.
General Assembly, representing owners, holds authority over strategic decisions like changing company name or headquarters.
Board of Directors has the highest authority in managing the company, except for specific issues requiring General Assembly approval.
Governance involves defining powers between Board of Directors and executive management to ensure effective decision-making.
Board of Directors should monitor CEO's performance without micromanaging to maintain trust and efficiency.
Conflict of interest within Board of Directors can arise from members benefiting personally from company decisions.
Chairman of the Board should manage members effectively, preventing unnecessary interference in operational details.
Family companies may face governance challenges when the founder or owner holds multiple roles, impacting decision-making processes.

01:20:34

"Board Membership: Responsibilities, Compensation, and Integrity"

"Al-Faisaliah" group is owned by the sons of Prince Abdullah Al-Faisal, with half the board being independent members.
Board members are chosen for their ideas, governance skills, and relationships, enriching the board.
Being a board member or chairman is a significant responsibility, requiring moral integrity and dedication.
A board member needs 20 to 40 full working days a year, including meeting preparation and committee participation.
The Chairman of the Board requires 40 to 60 days annually, coordinating with owners, investors, and regulatory authorities.
Membership in multiple boards significantly increases time commitments and responsibilities.
Experience in governance, regulatory knowledge, and industry expertise are crucial for board members.
The new corporate law has raised the ceiling for board member compensation to 500,000 riyals annually.
Financial compensation for board members has become more attractive, with variable compensation based on company profitability.
Board members have a responsibility to disclose any conflicts of interest, such as owning a company that supplies goods to the board's company.

01:36:16

"Managing Conflicts and Board Member Selection"

Disclosing conflicts of interest is crucial in business dealings, such as when owning a company that sells spare parts to another company where you are a board member.
If a relative invests in a company and benefits from insider information, it can lead to suspicions of unfair advantage.
Proper disclosure of personal interests is essential to avoid fines or conflicts of interest.
When disclosing potential conflicts, leaving the council during relevant discussions is necessary to maintain transparency.
The process of becoming a board member involves nominations, eligibility assessments, and approvals by regulatory bodies.
The Nominations Committee evaluates candidates based on experience, qualifications, and past council history.
The General Assembly votes on board member candidates, with influential owners often playing a significant role in the selection process.
The lack of attendance at meetings poses a challenge, leading to cancellations and rescheduling.
The success of a company's board relies on consensus, independence, and a focus on the company's best interests.
Aligning CEO incentives with board goals, such as profitability and growth, is crucial for organizational success.

01:51:40

"CEO Succession Planning and Board Dynamics"

CEO should bring top senior managers to Board of Directors meetings to present and build trust for potential succession.
Succession planning is crucial for the Board, ensuring readiness for CEO replacements in case of sudden departure.
Lack of consensus in the Board regarding agendas can lead to failure, hindering decision-making and causing conflicts.
CEO's strong personality marginalizing the Board can result in failure to supervise and control the CEO's actions.
CEO being a member of the Board can limit the Board's ability to oversee the CEO's work, impacting control and supervision.

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