Madrid conference content

1. MENA BUSINESS
INVESTMENT GROUP
Doing business in KSA
Hussein Balaghi
General Manager

2. INDEX
1.
Business cases
1.
2.
Failed Business Joint Company Spanish / Saudi for
Construction Company
3.
Success Joint Company Spanish / Saudi for rental
machinery
4.
2.
Failed JV Agreement Spanish / Saudi for Precast Factory
Success Spanish Company 100% with JV by project with
Saudi Companies (Electromechanical)
What to do / Not to do in order to succeed

3. 1. BUSINESS CASES: PRECAST FACTORY
1.
Saudi company acquired machinery for Precast Factory.
2.
They require technological partner to Join the Business.
3.
Spanish Partner was interested.
4.
MOU signed 60% Saudi 40% Spanish.
5.
Investment 10 MM USD 100% Saudi. Spanish partner to pay 40%
from future benefits.
6.
Initial capital 1 MM USD for Cash Flow 60% Saudi 40% Spanish.
7.
Negotiation of JV agreement before company constitution.
8.
Spanish partner wants to charge the start up cost 250.000 Euros.
9.
Spanish partner require the return of his capital share in case they
decided to left the project / Country in the future.
10.
JV agreement failed.

4. 2. BUSINESS CASES: CONSTRUCTION CO.
1.
3 construction companies constitute a Joint company in order to do
business in the Gulf area.
2.
They require a local partner in order to do construction projects.
3.
JV agreement successfully signed 50/50 Spanish companies / Saudi
company.
4.
Joint company constituted in KSA with CR.
5.
Spanish company hire a salesman in Spain with experience in sales
of construction projects and send him to Saudi Arabia in order to be
the responsible of the new Joint company.

5. 2. BUSINESS CASES: CONSTRUCTION CO.
6.
2 months later the salesman is fired because he didn’t fit with
the culture of the company (group of companies).
7.
The Spanish group of companies send another salesman with 10
years’ experience at one of the 3 companies as Project Manager.
No speak English. No sales skill. Very good technical skill and
project management.
8.
The new Joint company start the process of classification in Saudi
Arabia.
9.
A big number of potential projects was delivered by the local
partner but they didn’t finalise any offer due to the lack of support
from the technical department from Spain and no commercial
follow up.
10.
Finally all shareholders decided to stop the activity and liquidate
the Joint Company.

6. 3. BUSINESS CASES: RENTAL MACHINERY
1.
Spanish company specialised in rental machinery decided by end of
2008 to expand their business to the Gulf Area due to the crisis.
2.
Saudi partner was interested to Join the business.
3.
Local partner need some machines for his own Business. Spanish
company sent 2 heavy machines (400.000 USD value) to the local
partner without any guarantee in order to be paid later.
4.
JV agreement signed 50/50. Spanish company send machinery in
order to be rented by the new Joint company. The local partner
deliver all the infrastructures and initial capital. The new Joint
company will pay to both shareholders the value of the machinery
and the initial investment in 3 to 5 years.

7. 3. BUSINESS CASES: RENTAL MACHINERY
5.
Joint company constituted and start activity in 2009.
6.
After a period of operations, the new company improved the
operations in terms of Management, type of machinery to rent with
good margin, collection of receivables, maintenance…
7.
Since 2 years, the shareholders invest 2 MM USD per year to
acquire new machinery.
8.
The expectation of the business revenues in 3 years is 50 MM USD.
9.
The company is running now with good profit and increasing the
business continuously.

8. 4. BUSINESS CASES: ELECTROMECHANICAL CO.
Energy sector, Oil &
Gas, Petrochemical, industrial, renewable energy…

1.
Spanish company specialised in maintenance, electromechanical
works and energy plants decided to implement a new company in
Saudi Arabia.
2.
They constitute the company 100% Spanish capital without any local
partner.
3.
They signed a contract with Ex Aramco person who promised them
that he will bring them projects. They were lucky signing a contract
for a limited period of time and by this way they could cancel the
contract after discovering that nothing happened regarding the
promises.

9. 4. BUSINESS CASES: ELECTROMECHANICAL CO.
4.
Once they had the CR and activity licence, they sent a Sales
Manager and higher a local cost engineer in order to adapt the
offers for the local market.
5.
They sign JV agreements by project with different local
construction companies.
6.
After 6 months of operations of the office, they get the first project
and started the execution.
7.
They were able to do this project thanks to the support of the local
partner. They needed 300 workers for a 6 months project. The local
partner delivered some workers and the work visas for immediate
hiring of the rest of workers. It was one of the success keys to win
the project.
8.
The company is running without any problem with a high potential
business in the market.

10. 2. WHAT TO DO / NOT TO DO
IN ORDER TO SUCCEED
1.
TO DO
Study and analyse the market /
opportunity in Saudi Arabia:
Our Product / Services / Projects
/ Prices are feasible for the
market?
Are we competitive?
What added value we bring to the
market?
Are we prepared to expand our
business to this market?
a.
b.
c.
d.



Do we have the required
resources to approach the
market?
e.


2.
Our team speaks English?
Our team is able to be expatriated
and to work in different conditions
(may be hard), different culture?
Do we have skilled people to export
our knowhow and experience?
Economical investment.
Key people.
Take a strategic decision and
establish our company in the
market. Nobody will award you
projects if you are not present in
the market.
NOT TO DO
1.
Don’t decide to go to this market
because:
a.
b.
2.
.
Everybody speaks about the big
business opportunities and
projects.
Your competitor was established
their and he is doing business.
Don’t try to get projects from your
office in spain. Don’t believe that
awarding projects in KSA is easy.
It’s very hard effort and too much
worldwide competitors.

11. 2. WHAT TO DO / NOT TO DO
IN ORDER TO SUCCEED
TO DO
NOT TO DO
3.
If you decide to go with a local
partner, choose the correct local
partner.
3.
4.
Understand the local culture to do
business and adapt yourself. Don’t
wait that the local partner will
change his culture.
4.
5.
6.
Be competitive. Work hard. It’s a
market with huge opportunities
and big potential of projects in all
the sectors but the best worldwide
competitors are present.
Be supported by advisors
(Lawyers, consultants, etc.) with
business mind and with full
knowledge of the business culture
and market.
5.
6.
Don’t search for a rich and
beautiful partner to invest in your
business.
Don’t plan the business as we are
in Spain without understanding the
local culture.
Don’t select a local partner
evaluating only the external image.
Investigate his success record.
Don’t use lawyers and advisors
that could be obstacle to do
business (don’t understand the
culture).

12. 2. WHAT TO DO / NOT TO DO
IN ORDER TO SUCCEED
TO DO
7.
If you choose a local partner, you
should trust, trust and trust and be
sure that the local partner trust you
also.
8.
Invest together with your local
partner and create long term
business strategy.
NOT TO DO
7.
8.
9.
9.
Send the right key people who
knows your business / speak English
and select the right local people who
knows the local market.
10.
Follow up the business and maintain
the relationship with your local
partner.
10.
Don’t consider that the local partner
can’t do the business without your
knowhow or technology. Don’t sub
estimate the local partner capability
and added value.
Don’t plan a short term business.
Don’t send not prepared people to
lead the business (No English, no
knowhow, no right skill,…). Don’t
choose the people that accept to be
expatriate but not prepared
Don’t start the business if you are
not sure about the market or you
don’t trust in your local partner .

13. Don’t choose a beautiful Partner.
Choose the partner who makes your life beautiful.

14. Thanks for your attention
Hussein Balaghi