In Lumina\u2019s recent M&A Survey, we highlighted the important role of regional champions in the Middle East\u2019s M&A landscape. We sat down with David Stockton, Group CEO of Dulsco, for the second in our deep dive series to discuss the market, deal doing from the perspective of a strategic corporate and the value of an effective M&A strategy.<\/p>\n
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Q: Dulsco is known as a leading people and environmental services provider, over your tenure at the business, how has it evolved?<\/strong><\/p>\n It\u2019s been a remarkable journey. As we approach our 90th anniversary next year, I\u2019ve been reflecting on the changes we\u2019ve gone through, especially during my tenure of eight and a half years as CEO. While the business has transformed in so many ways, there\u2019s one constant that ties our history together: people. Across all the verticals we\u2019ve operated in, people have always been at the heart of what we do.<\/p>\n However, the pandemic marked a significant turning point for us. Before that, we were predominantly a people-driven business focused on environmental transactions. But since then, we\u2019ve shifted to an output-driven approach, branching out into various sectors. This agility has allowed us to strategically reevaluate our strengths and focus on areas where we can truly innovate to add value, rather than competing as just another commoditized provider.<\/p>\n The shift was deliberate and required us to rethink everything\u2014from our operations to the sectors we wanted to focus on. During my tenure, we\u2019ve seen 3.5x growth, achieved through a combination of organic and inorganic strategies, with acquisitions of Parisima in 2022 and Advance Global Recruitment in 2023. A major driver of this success has been our ability to build on our legacy of quality\u2014whether that\u2019s the quality of service, the engagement we have with customers, or simply delivering on the promises we make.<\/p>\n <\/p>\n Q: You mentioned the impressive growth of Dulsco over in the last decade – how important is your M&A strategy in the process of achieving this goal?<\/strong><\/p>\n Organic growth alone takes time, and while you can lead with price to drive hyper-aggressive growth, that often comes at the cost of quality. Developing a clear M&A strategy was critical to achieving our growth targets and will continue to be moving forward.<\/p>\n The key, we\u2019ve found, is to strike a balance. A symbiotic strategy that combines organic growth with the right acquisitions or partnerships can create real value. These might take the form of full acquisitions or strategic partnerships that enable us to enter new territories or enhance existing offerings. By leveraging our expertise and service capabilities, we can significantly enhance what another company has already built, while also creating new growth opportunities for ourselves.<\/p>\n <\/p>\n Q: Can you share an example of how your M&A strategy has been implemented?<\/strong><\/p>\n Our M&A journey has been an evolution. Historically, we\u2019ve been a homegrown business since our founding in 1935, so our first major foray into M&A\u2014acquiring Parisima\u2014was a big step. There were plenty of learnings from that experience, but I\u2019m proud of where we\u2019ve taken that brand. Parisima gave us both geographic reach and service line clarity, and we approached the integration with a clear purpose: to uplift our service offerings without duplicating roles or processes.<\/p>\n The focus wasn\u2019t just on consolidating operations but on enabling Parisima to organically grow quickly post-acquisition. We supported it with financial resources, operational expertise, and back-office capabilities, creating a framework that allowed the business to thrive. Now, we\u2019re looking at ways to accelerate that growth even further, perhaps through targeted tuck-in acquisitions to enhance its capabilities.<\/p>\n <\/p>\n Q: How has your approach differed with other acquisitions, such as AGR?<\/strong><\/p>\n AGR was a different kind of acquisition. It came about during what I like to call our \u2018dating program\u2019, where we were actively exploring opportunities with potential partners. With AGR, we found a company whose values aligned perfectly with ours. That\u2019s a crucial factor in any M&A deal\u2014if the values don\u2019t align, that can be a challenge, and you risk upsetting both the culture and the momentum of your business.<\/p>\n AGR\u2019s integration was about ensuring we had the right fit to complement our existing operations. With the help of our advisors, we took the time to evaluate the business thoroughly, and it\u2019s been a great match for us. The process taught us the importance of being agile and discerning, especially when considering opportunistic acquisitions.<\/p>\n <\/p>\n Q: You mentioned certain challenges of doing M&A deals, our recent M&A survey highlighted the lack of suitable targets and stakeholder alignment as some of the challenges to closing deals. How do you mitigate these challenges?<\/strong><\/p>\n When we look at potential targets, there are a couple of paths we follow. Some targets are actively marketed, but in other cases, it\u2019s more about spotting opportunities. It\u2019s similar to talent management\u2014you actively seek out companies that align with your strategic vision, even if they\u2019re not on the market.<\/p>\n As a large family business, we don\u2019t have the luxury of a dedicated M&A team, so this is an area where I personally play an active role. Our approach includes mapping specific sectors that align with our growth strategy and identifying targets through market research, industry insights, or even hearsay. We even look at businesses that may be distressed or facing challenges as long as they can add value.<\/p>\n That being said, this strategy doesn\u2019t mean we ignore opportunistic deals marketed to us \u2014they do come along from time to time, and when they do, we\u2019ve developed the ability to evaluate them quickly and effectively.<\/p>\n We screen potential deals quickly to assess whether we can add value to the target, whether the target can add value to us, and whether the price-value relationship makes sense. This disciplined approach helps us move swiftly when the right opportunity arises without getting bogged down in analysis paralysis.<\/p>\n In terms of seller and buyer alignment, the key is early stakeholder engagement. Being a family business, it\u2019s vital to align from the start. That way, we avoid wasting time\u2014both for us and for the other party.<\/p>\n Deals are done between people, so we also balance this with understanding the motivations of the seller. Sometimes there\u2019s a disconnect between valuation and ego\u2014business owners might believe their company is worth more than the market will bear. Our goal is to have an open, honest dialogue to ensure alignment.<\/p>\n It\u2019s about finding that sweet spot between a fair price and the seller\u2019s vision for the business. If they\u2019re genuinely committed to seeing their business succeed post-sale, it creates a stronger foundation for the partnership.<\/p>\n <\/p>\n Q: Can you talk us through the importance of your international acquisitions for the benefit of your business and the wider region?<\/strong><\/p>\n That\u2019s a great point, and it\u2019s something we\u2019re particularly proud of. As a regional, homegrown business, acquiring an overseas-headquartered entity gives us an immediate international footprint. Take AGR as an example\u2014while one of our brands had already established a presence in 17 countries, this acquisition gave us access to operations in 70 countries practically overnight.<\/p>\n This transformation is significant not just for the scale but for what it symbolizes. A UAE-based business now owns a UK-based entity operating across 70 countries. That\u2019s a moment of pride and also reflects positively on the UAE. Dubai, in particular, is known for its ambition, and investments like ours demonstrate that we\u2019re not just attracting inward investment but actively contributing to international markets. It\u2019s a two-way street\u2014bringing expertise back into the UAE while also exporting our values and capabilities.<\/p>\n It is also a highly symbiotic relationship. Operating in the UAE gives us a platform of credibility that resonates globally. For example, in the energy sector, our contracts with ADNOC demonstrate our capabilities, which opens doors in regions like the North Sea. And it works the other way too\u2014our success in the North Sea strengthens our reputation in the Middle East.<\/p>\n This cross-pollination of expertise and reputation is critical. It allows us to reference successful operations across different regions, showing prospective clients and partners that we can deliver at a high level, no matter the market.<\/p>\n <\/p>\n Q: Returning to the M&A survey, another key theme that came out was the increased use of debt and mezzanine debt products to support deals in the region. How important is the development of this market to deal making and the development of businesses?<\/strong><\/p>\n That\u2019s an interesting topic, and our experience has been somewhat unique given our legacy. As a 90-year-old business, we\u2019ve traditionally relied on our reserves rather than external financing to fund our growth. Historically, we\u2019ve focused on using capital to expand through organic growth, acquisitions, or a combination of both.<\/p>\n But things have changed\u2014both for us and for the region. A few years ago, the cost of capital was very economical, which made financing relatively straightforward. Recently, however, we\u2019ve seen those numbers climb significantly. For those of us who\u2019ve been in the business a while, this is nothing new\u2014it\u2019s more a return to what we\u2019d consider realistic levels. But I think there\u2019s been a psychological adjustment for many businesses that had grown used to extremely low rates.<\/p>\n For us, it\u2019s about ensuring that our capital deployment is aligned with our long-term goals. Unlike businesses that aim for quick three-to-five-year returns, our approach is more measured. We operate in industries where margins may not be as high as in other sectors, so managing cash flow and working capital is critical. Flexible debt products that can more closely align with the dynamics and long-term goals of individual businesses can only be hugely positive to support growth.<\/p>\n In terms of M&A, when we acquire, we\u2019re careful not to overburden the business. It\u2019s essential that the acquired entity has the runway it needs to function and perform, whether that\u2019s through structured financing, reinvestment of reserves, or other forms of leverage, the goal is to allow it to operate efficiently without being stifled by financial constraints.<\/p>\n The regional debt landscape is evolving. For companies like ours, that opens doors. We\u2019re now seeing opportunities to acquire or invest in businesses that might not have been available before. That can only be positive for the region.<\/p>\n <\/p>\n Q: Finally, to close on, our survey showed that 70% of respondents expect the number of deals to go up or stay the same next year. What do you think the next 12 months will look like from an M&A deal perspective?<\/strong><\/p>\n A: I\u2019m very optimistic about what\u2019s ahead. The way I see it, if one deal doesn\u2019t move forward, there\u2019s always the next one. Currently, we have three deals in the pipeline\u2014if all three come through, that\u2019s fantastic. But at the same time, it\u2019s important to recognise when a deal isn\u2019t progressing and when it\u2019s time to step back. Deal fatigue is real, and when the initial excitement starts to drag into delays or obstacles, it\u2019s better to reassess and pivot rather than let it drain resources and energy.<\/p>\n For us, the key is ensuring the right fit early on. If it becomes overly complex or burdensome later, we\u2019re prepared to hit the reset button and move on. Whether it\u2019s through building internally or seeking alternative acquisitions, the focus remains on achieving long-term value.<\/p>\n I also believe the region and the global market have some incredible opportunities on the horizon. Having the right people in place to guide these transactions is critical. That \u2018third eye\u2019, whether it\u2019s quality external advisors or key internal stakeholders, is invaluable\u2014it ensures we stay objective and aren\u2019t swept away by the allure of growth at all costs.<\/p>\n So, yes, I think the next 12 months will be strong. If we revisit this conversation a year from now and haven\u2019t closed any of the deals we\u2019re working on, that would be a failure on our part. But we\u2019re pushing hard, and I\u2019m confident we\u2019ll see meaningful progress.<\/p>\n