Mohamed Aboubakr on Investment Discipline M and A and IPO Readiness

Mohamed Aboubakr

Group CFO | Finance Strategy Transformation and Value Creation

The Group CFO of Albawardi Group Holding explains how finance leaders should test investment opportunities, guard against over-optimism in acquisitions and prepare businesses for the demands of a public listing.

Investment decisions are rarely determined by a single ratio. For Mohamed Aboubakr, Group CFO of Albawardi Group Holding, the strongest opportunities are those that combine market relevance, strategic and cultural alignment, credible returns, liquidity discipline and an executable operating plan. In this interview, he discusses the finance test for investments, the danger of optimism in mergers and acquisitions, the strategic value of defensive deals and the financial foundations required before an IPO.

1 . What makes an investment opportunity worth pursuing from a finance perspective

Finance is an integral part of the investment process. For an opportunity to be viable, it must pass a series of interconnected tests covering the industry landscape, strategic alignment, financial returns, liquidity and risk. None of these considerations should be assessed in isolation.

Industry and market viability

The first question is whether the investment operates in the right sector. Does it solve an existing market need, or one that is reasonably certain to emerge? More importantly, is the industry likely to endure in a form that allows the investment to create value over the long term?

Strategic and cultural fit

If the sector is viable and the target is well positioned, we then assess its alignment with our strategy. This includes human and cultural compatibility. Can we work productively with the leadership team? Do we share comparable values, business logic and a long-term vision? If the answer is yes, we move into a deeper financial evaluation.

Financial returns

Internal rate of return, net present value and payback period remain central to the assessment. We need to establish the expected return and the timeframe in which it can be realised. If the return is too low or the payback horizon is unjustifiably long, the opportunity may fail the threshold regardless of how attractive its other qualities appear.

Liquidity and cash-flow timing

Cash remains king. Beyond headline return metrics, finance must determine when cash flows will materialise and whether that timing aligns with the organisation’s wider capital requirements and liquidity profile.

Execution and operational capacity

The opportunity must also match the organisation’s risk appetite and execution capability. If it involves specialist knowledge, a new geography or an unfamiliar segment, the company needs a credible plan to retain talent, allocate responsibilities and coordinate with its partners. It must also have enough management capacity to pursue the opportunity without weakening its core operations or losing existing business momentum.

2 . What is the biggest financial challenge during an M and A transaction

Challenges can include overvaluation, cash-flow misalignment, hidden liabilities and the failure to realise expected synergies. In my view, however, the greatest danger is allowing over-optimism to weaken an otherwise prudent assessment.

An acquisition requires a significant commitment of capital. It is dangerous to assume that the valuation is unquestionably correct, every synergy will materialise, integration will proceed smoothly and no unexpected liability will emerge. That combination of assumptions can place the buyer in a difficult position unnecessarily.

Finance leaders should stress-test the valuation, model a range of scenarios and create a meaningful cushion for surprises. The integration learning curve can be expensive and slower than anticipated, particularly when the buyer has limited experience in the target’s industry. The less familiar or more volatile the sector, the greater the risk allowance should be.

It is also prudent to allocate a specific reserve for unforeseen costs and ensure that uncertainty is reflected in the purchase consideration. Positive surprises are always welcome, but they should never be required for the original investment case to work.

3. How do you evaluate whether an acquisition will create long term value

Assessing long-term value goes beyond conventional quantitative measures. Return on invested capital, run-rate synergies, cost savings and scalability are important, but the evaluation must begin with the strategic intent of the transaction. Why are we acquiring this business?

An acquisition creates lasting value when it advances a defined strategic objective, such as entering a new market, acquiring intellectual property or specialised know-how, securing market share, or mitigating a critical downside risk. The analysis should remain multidimensional even when one strategic consideration is particularly important.

Value creation is not always additive; it can also be defensive. In the telecommunications sector, I witnessed the acquisition of an internet gateway provider in a market served by only two gateway operators. A major competitor had already acquired the first operator. If it had also been allowed to acquire the second, our company would have faced an existential vulnerability because a rival could have controlled the essential infrastructure on which the business depended.

In that context, paying a three-times premium to the conventional valuation was justified. The transaction protected the core business model and preserved operational autonomy. Its real value was not simply incremental earnings; it was the protection of the company’s market position and long-term strategic independence. Value must therefore be measured against the specific objective the transaction is designed to achieve.

4. What key financial factors should a company consider before an IPO

An IPO can be a powerful value-creation milestone. It can strengthen business sustainability, improve governance, raise growth capital and create an exit route for investors at an attractive valuation. The outcome may be compelling, but the journey is complex and demands substantial preparation.

The first consideration is the strength of financial reporting. Can the company complete its monthly, quarterly and annual close within demanding deadlines? Does its ERP environment support detailed analysis and the disclosure requirements of applicable standards such as IFRS? Does the finance team have the required technical capability and understand the regulatory language of the Capital Market Authority?

Auditor readiness is equally important. The audit firm must have the necessary regulatory licence, market credibility and capacity to meet tight interim and year-end reporting deadlines.

The company must also test the quality and sustainability of its financial performance. Are profits recurring, or are they supported by one-off gains? Do measures such as EBITDA support a credible valuation that can withstand investor and regulatory scrutiny?

Operational and financial independence

The business should be capable of operating on a standalone basis rather than remaining dependent on the founder’s wider group after listing. Banking facilities should be properly segregated, and material related-party transactions may need to be restructured well before the IPO.

Business model and regulatory fit

How the company generates revenue matters. A highly commoditised business with limited value addition may struggle to meet regulatory or investor expectations. Establishing regulatory fit early is essential; otherwise, significant preparation costs may be incurred before discovering that the listing proposition is unsuitable.

Listing route and market choice

Management must decide whether to pursue a private placement before listing, proceed directly to market, and choose the venue that best suits the company’s scale and ambitions. In Saudi Arabia, for example, that includes deciding between the Main Market and the Parallel Market, Nomu, while also considering whether a domestic or international route is appropriate.

Execution roadmap and contingency planning

The IPO plan needs a credible timetable, realistic resource allocation and a clear alternative if the transaction is delayed or suspended. If market conditions prevent the listing, the business should still be able to benefit from the stronger governance, reporting and operating model developed during preparation. Management should also identify alternative routes for founder liquidity and long-term value creation.

Stay Ahead

Get exclusive interviews & award updates in your inbox

A global business magazine bringing you exclusive interviews, in-depth features, and stories on the leaders shaping industries worldwide.

Quick Links

Explore

Get In Touch

info@theleadershipgazette.com