The Pioneer

The Pioneer

As MB Holding celebrates 30 years of operations, Mohammed al Barwani’s is a success story that can be a lesson to the Omani entrepreneur of today. BusinessToday reports

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As the MB Holding Group celebrates 30 years of operations, Mohammed al Barwani, founder chairman, says all he meant to do when he started out was to have a sustainable venture that employs about 15 people. Today his business has interests in petroleum, mining, manufacturing and hospitality, employs 6,500 people across 22 countries and has a networth of US$557mn (as per unaudited management account for the year ending 2011).

At a time when there is a focus on SMEs, Barwani's is a success story that can be a lesson to the Omani entrepreneur of today. He didn't have it easy, and had his ups and downs but what differentiated him from the others was his ability to scout for and identify new opportunities even when the chips were down. We went from a trading firm to a services company, grew in the services industry and then went into oil field services. From there we moved into exploration and production and later into exploring and mining minerals. We are now looking at hotels and tourism. We have been diversifying into other industries rather than only looking at different areas of the same business," says Barwani.

MB Holding is the only privately owned group in Oman (apart from banks) that is rated by international credit rating agencies such as Fitch and Standards and Poors (S&P). In another first, the group raised US$320mn in a bond issue in 2011 to further fund the growth of MB Petroleum Services (MBPS) making it the first private business house in Oman to have raised a bond in the global market.

While it is MB Trading, a small trading company established in 1982, that has grown into the multi-million conglomerate spread across continents, Barwani's first foray into business was in construction and real estate, where he incurred heavy losses. "We did not start off as a trading company as many people believe. We started in the real estate business building small villas. We lost heavily in that business and it came to a point where we had 70 employees and there was no money as those who owed us money didn't pay, but we still had to pay the sub contractors and employees. It was a real tough time." In those days, Barwani says he used to take a water tanker to the construction site at 5:30 in the morning. "All of us had to do all kinds of jobs like driving the trucks, drawing water and getting cement."

While Barwani was losing money in his construction and real estate business, he saw another opportunity. He noticed that the oil field services sector was growing and entered that. Though business was tough, he left his job at PDO to concentrate on business. "It took us about five years to become profitable. At any point in business there are going to be lucky breaks and some very hard times. There are times when things are not going well and you are up against the wall. The important thing is not to lose heart. This is the advice that I give people when they start a business. You need to give yourself at least five years time to adjust and learn. Expect five years of hard time at the end of which you would have learned the market and people would start knowing you and your business."

The saga

MB Trading was renamed MB Petroleum Services in 1996 to reflect its activities and remains the flagship of the conglomerate even as the group diversified into other fields. "Every 10-15 years companies tend to find themselves in a new market or a new environment because of changes in the business environment and management practices. Our core business has always been the oil industry, but in 1997 we diversified into mining and in 2009 into hospitality. As we are going into the second generation, we want to create opportunities for all our children. So we diversified into new industries where we saw potential," says Barwani.

Barwani's wife Sharifa al Harthy has been involved in the business since the very beginning, working alongside the entrepreneur in the ups and downs in roles that ranged from dropping off water at the construction sites to managing human resources and back office operations. Today as the deputy chairperson of MB Holding, her focus is on CSR activities.

Barwani says he never expected to achieve this scale of operations when he turned an entrepreneur. "I had hoped to establish a small business with an office which will grow to employ about 12 to 15 people which would be self sustaining. At that point my wife was working for the government - she was teaching HR in a college. But the business kept growing and it came to a point where there were 200 people. All the HR issues and contracts for employment became quite tough, so I asked my wife to quit her job and join the business handling HR, legal issues and back office while I handled the technical side."

Building the future

Today present in 22 countries, the foundation of the group's successful expansion into the international markets was laid in 1997 when the company made its first major overseas acquisition - a government owned Hungarian oilfield services company. "It was a successful venture as we acquired a very large company for a small price. At that time, it had international operations in Syria, good equipment and a good management structure. The value we got out of the company was far more than what we paid for it. That was the beginning of our international operations in the oil field segment," says Barwani. The acquisition also helped MB Petroleum gain prominence in the international markets and a corporate structure only strengthened its position further. That helped the group secure external aid to fuel future expansions.

When it comes to determining which markets to enter, Barwani looks for busin-esses that add value and synergies. "We do not look to simply enter as an investor. We take a long-term view on the markets that we would like to enter and look at the next stage of growth. At the same time, we don't want to overstretch our growth in each market. We are comfortable with Europe, Middle East and parts of Africa and Asia."

Barwani admits that not all ventures can be fruitful. Sometimes only when you enter a market you realise that the conditions are totally different from what you had expected it to be and at that point you have to decide what your strategy will be. "Indonesia was particularly challenging. We moved out and then re-entered successfully. Russia was very difficult and we eventually pulled out and never went back. Market conditions were tough and local competition was high."

Today as the group looks at entering Kazakhstan, Barwani says they have made sure that they have done the homework. "Now we invest more time in understanding the markets. Kazakhstan is very similar to Russia. It is a very difficult market but we have spent much more time going back and forth on the fundamentals." As far as new markets are concerned for 2012, select opportunities are being eyed in the Asian and African markets, with Mawarid Mining focusing on Kazakhstan, Tanzania and Saudi Arabia. In five years, Barwani expects the mining business to become the largest contributor towards the group's overall revenue.

For Petrogas, the focus is mainly on the home markets as potential exists for new blocks to be discovered. The group's engineering arm United Engineering Services (UES) bought assets of two Malaysian companies Professional Power Craft International (PPC) and Wise Marine in February this year. New ventures into international markets will be funded through a combination of internal cash and external aid. Plans are also on the cards to eventually take all the subsidiaries public, but the initial focus is on MBPS. "MBPS is still growing and its requirement for capital can be obtained through public funding," says Barwani.

While expansion into international markets will continue for the foreseeable future, the group plans to also focus on the local market to tap into oil and gas exploration contracts. High spending that accompanied the group's aggressive expansion strategy prompted S&P to downgrade MB Holding's credit rating to B- from B+ in December 2011. Barwani says this is no reason for concern as cash flows are robust and the company has adopted a transparent reporting structure. Meanwhile, Fitch has maintained the rating at BB- with a stable outlook.

Going forward, MB Holding plans to invest RO100mn in the next four years in Oman's tourism industry and is looking to turn its tourism arm into a public vehicle that can merge into other businesses.
MB Holding has seen immense success in the last three decades, but Barwani acknowledges that the task ahead is in maintaining the growth momentum seen in the early years of operations. "Markets are getting more competitive. Earlier we had to compete with only the European and US players, but today we face stiff competition from Asia and Africa too. Oil and gas is still our primary area of focus but the mining and engineering business - the largest businesses - are at a mature stage. We see good growth potential for the smaller businesses."

Corporate Structure

In many ways MB Holding represents a successful and structured family business where, while every member of the family is actively involved in one aspect or the other of the group, the business is run by a team of professionals. The success that MB Holding has seen in both local and international markets lies in establishing a corporate structure alongside the family ownership, says Usama al Barwani, business development director, MB Holding and managing director, UES. "We realised that if we had to go international, it couldn't be managed as only a family business and had to take on a more professional structure."

The group was initially managed under the chairman's office which was technically under the MBPS umbrella. In 2004, a decision to restructure and incorporate a holding company in the name of MB Holding Company, Oman to oversee all the group companies was taken. All subsidiary companies are headed by professional CEOs or managing directors, who are responsible for the day-to-day operations and management of the company.

MB Holding also established a board of directors in 2008 that consists of three shareholders, three independent members and two executive employees. In addition, the board has constituted an audit committee and a compensation committee. Barwani says people often wonder how the group manages its overseas operations as an Omani company. "Scale is very important here. It is much easier to handle 100 people there than send people from here to manage operations abroad."

Succession Planning

At a time when many a successful business empire is unravelling due to lack of succession planning, Barwani has put in place clear roles for his five children - two sons and three daughters - in the group, based on their interests. "We have seen families in the Gulf and the Arab countries that were torn apart after the first generation left a legacy behind for the children. My wife and I wanted to avoid that possibility. Usually the girls end up losing out in the family business. We didn't want that. My wife first spoke with lawyers in Oman to see how we can define each of their roles. Then we brought in consultants from the UK."

In fact they were so serious about succession planning, they had consultants speak with all their children on their areas of interest before drafting the plan for the second generation. "Broad guidelines were formulated with a special equation to provide equal voting rights to all the children. They will all have their say on the executive board," says Barwani.

The corporate management structure for the company will continue, while ownership is being passed onto the children, says Barwani. "Each one's roles are clearly defined in the company. We consulted several lawyers to ensure that each of them, including the girls, got equal voting rights in matters of executive decision," adds Sharifa.

Diversification into some of the businesses like hospitality was also done bearing in mind the diverse interests of the next generation, with each of the five children focusing on specific areas of the business. Mergers and acquisitions has been the forte of eldest son Usama in the last several years. "UES is a growing company and we are planning to turn this into a global engineering firm that international companies can partner with in the area of contract manufacturing," says Usama.

Barwani's younger son Tariq, a qualified mining engineer, joined Mawarid Mining earlier this year. The eldest daughter Safana has a keen interest in real estate and tourism and is also the managing director of Musstir. Iman, the second daughter, is involved in corporate communications and CSR, while the youngest, Rahma, who is still in college will focus on philanthropy along with Sharifa.

While there are no immediate plans to pass on the baton to the second generation, the two pioneers know what they want to do when they finally decide to take a backseat. Sharifa will concentrate on philanthropic activities while Barwani will continue to advise the children. The company he started when his eldest son Usama was a toddler has grown beyond his imagination and Barwani says he is happy that all his five children are interested in the business. But he has another dream now - to see the third generation coming.

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The Pioneer
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