Rasmala has rarely been out of the headlines this year, as the full weight of its restructuring programme has been revealed. First announced in November, the restructure saw CEO Tamer Bazzari replaced by David Woods and Anwar Abu Sbaitan. Woods’ voluntary departure was subsequently announced in June, and Sbaitan now runs the company under the watchful eye of the firm’s chairman, Ali Al Shihabi. In May, head of brokerage Khaled Masri also departed around the time that the company wound down its UAE retail brokerage business, and former head of private equity Michael Kidd was promoted to COO, as plans for a second private equity fund were abandoned. Along with the senior reshuffle, approximately 30% of the company’s staff was made redundant in an effort to cut costs and streamline the company’s operations.

It all paints a worrying picture from the outside, at a time when investor sentiment is already weakened across the region. However, despite internal turmoil, the investment bank continues to hold AUM of approximately $900m in its asset management division, and $1.1bn overall, allowing it to maintain its status as a significant player in the regional market. Al Shihabi is adamant that the restructure is a necessary stage of the company’s reinvention. So, is there a method behind the madness?

Trouble at the top

“I think we took some swift, hard decisions,” says Al Shihabi. “If you look at some of the public companies in our space, many of us face the same issues. It was a high cost base that went down dramatically in the last 24 months. Being a private company, we have to be more decisive and those things had to be done.”

In 2004, Rasmala had 15 employees, including former CEO Bazzari, but over the past seven years this figure has shot up to almost 200. Those within the company seem to believe that it grew too quickly, and this certainly appears to be the case. Heavily exposed to Egypt and the UAE, the firm’s ambitions were dealt a blow when the global financial crisis hit, and towards the end of 2010 top-level discussions began to centre around the future of the business.

In November 2010, a 25% cost reduction initiative was announced, and the company’s communications department was axed in the first batch of job losses. Rumours began to circulate that all was not well within Rasmala’s top ranks, and Al Shihabi confirms that he and Bazzari clashed over how best to manage the company’s future. “We had differences in opinion about how severe the restructuring should be,” says Al Shihabi. “He, having been involved in building up the firm aggressively over the last few years, wanted to take a more cautious approach. It was a clear case of disagreement.” This particular disagreement led to the departure of Bazzari, after eight years as CEO of the company.

“When there are differences of opinion between the CEO and the chairman, one of them has to go,” adds Al Shihabi. “It’s as simple as that.”

Bazzari is now CEO and founder of Genero Capital, a new Dubai-based financial services company which has recently forayed into asset management, as well as private equity, corporate finance and advisory services.

Al Shihabi promptly installed Woods and Sbaitan as co-CEOs in order to oversee the restructuring process. Woods retired in July, with Sbaitan taking over the mantel of CEO. Since November, around 30% of the company’s staff has been trimmed, but according to Al Shihabi, no further job losses are anticipated. “When you have to restructure, sometimes you need new faces and new attitudes, but I think we have a very good and stable team now,” he says.

Cutting its losses

But it is not just high level departures that are causing concern. The company recently closed its second private equity fund after failing to secure sufficient investment, and its UAE retail brokerage business was wound down earlier this year after it was concluded that the business exposed Rasmala to “a heavy operational burden and high risk for a minimal return”.

The winding down of the private equity fund fuelled rumours of unease among investors, particularly Oman Investment and Finance Company (OIFC), which released a statement alluding to unspecified concerns about the fund’s management. However, Al Shihabi denies that OIFC’s withdrawal sparked the fund’s closure and claims that it only represented 3% of the fund. “OIFC’s statement wasn’t clear,” he adds. “They offered a retraction but we said no.” However, he concedes that a lack of investor confidence led to the fund closure.

“Investors are concerned about long-term developments,” he says. “Our private equity fund was a seven to 10 year commitment and this is not the environment we felt investors were comfortable in. “We hadn’t found any opportunities to deploy capital and we felt our investors were getting nervous about keeping that capital deployed for investments that would have this long-term time horizon,” he adds. Going forward, the company plans to look at private equity on a deal-by-deal basis.

“One of the problems in this part of the world is that people never want to discuss certain things,” says Al Shihabi. “Everyone knows brokerage volumes have grown very little in the region, corporate finance has gone down and the whole region has gone through revolutions and political turmoil. You would be stupid not to react to that and take a more cautious attitude. I think that’s a very sensible approach that people should take.”

However, Rasmala was arguably more exposed than others during recent months. The company is heavily invested in Egypt, with head of asset management Eric Swats estimating that 65-70% of the company’s asset management exposure is in the troubled emerging market. In March, the company confirmed that it suspended subscription and redemption requests on its Mena Equity Opportunities Funds and Islamic Mena Equities Opportunities Funds for three weeks while the Egyptian Stock Exchange was closed. Swats told Mena FM at the time that he was “very concerned” about Egypt equities and would be taking a cautious approach going forward. He added that the company would not be launching any more funds in Egypt in the near future. “We were conservatively positioned in front of the revolution and we remain very conservative in our allocation,” says Swats. “Our equity portfolios have 20-25% cash in them. Would we ever go any higher than that? Sure.“

Planning ahead

This conservative attitude is indicative of the company’s new approach, post-restructure. Now that the job cuts have been completed and a single CEO is in place, the company seems ready to refocus on its core businesses, including asset management in the GCC and Egypt, equities, institutional brokerage and corporate finance advisory.

“We felt that it made much more sense to be a bit more modest about expectations and future growth, to prepare the firm for what could be a slow environment this year,” says Al Shihabi. “We are quite happy with the way the restructure has worked out. It’s been quite successful, and these things are never painless.” Al Shibahi even talks about looking for acquisition or partnership opportunities “in areas that give us scale”, although the company has no businesses in mind at the moment.

Going forward, Al Shihabi says that he wants Rasmala to be “one of the most successful, high-quality operators in the investment banking field in the region.” However, following the launch of its Palestine Fund in May, the company has no further fund launches in the pipeline, and caution seems to be the cornerstone of the organisation for the time being. “You can never undertake a restructuring of an operation without a public relations impact,” says Al Shihabi. “That’s the price you have to pay. But as people begin to see that the strategy is being delivered, they will calm down.”