MENA private equity investments rise

JEDDAH – The private equity industry in the Middle East and North Africa (MENA) region continued to show signs of recovery in 2012 with investments and exits both registering significant growth, MENA Private Equity Association said in its 2012 annual report released Sunday, highlighting the outlook of the industry in the region.
The report also revealed that small and medium enterprises (SMEs) and high growth technology and media companies attracted significant investment and were one of the most active areas in the industry.
On the other hand, private equity had suffered from persistent uncertainty in Europe and depressed fundraising environment in 2012. MENA managers focused in 2012 on enhancing value and exit opportunities for their current portfolios. The report concludes that while private equity activity in some countries remains depressed due to uncertainty, investment in these countries is expected to return to historical levels in the short to medium term.
Total number of investments witnessed an increase to 91 from 84 year on year. Overall fundraising fell to $400 million, from $900 million the previous year, driven down by smaller fund sizes and global macroeconomic uncertainty. However, the total value of funds announced in 2012 increased compared to 2011, by $200 million, suggesting that fund managers remain optimistic about MENA investment opportunities.
Average investment size remained stable at $8 million in 2012, with no increase in the past three years, reflecting continuing focus on venture capital, growth capital and SME investments. Buyouts and other large deals of above $50 million are increasingly rare.
Non-cyclical sectors such as oil and gas, healthcare, and education accounted for nearly 60 percent of investments in 2012. Separately, ICT alone accounted for 40 percent of investment volume due to rising activity among venture capital funds. Sectors hit by the global financial crisis, such as real estate, construction and financial services, remained less popular.
UAE topped the list of the volumes in the GCC. Morocco, Lebanon and Egypt claimed the most deals by volume in 2012; Even so, Egypt fell short of past performance this year as the country struggled with lingering political instability and economic uncertainty leftover from the Arab Spring, while Turkey emerged as a popular destination outside of MENA.
The number of exits completed during 2011 and 2012 increased compared to 2009 and 2010.
The report noted that $6.4 billion dry powder is estimated to be available for investment.
Dr. Philip Boigner, Director of Technology Investment at the Dubai Silicon Oasis Authority and a member of the association’s VC Task force, said: “Most economies in the region are growing despite political uncertainty. Private equity houses are capitalizing on this trend by focusing more and more on young companies that are on stellar growth trajectories. We have seen this, for example, in the venture capital space, where VCs are investing in ecommerce and digital media platforms that can be scaled across the whole Arab region.”
Imad Ghandour, Managing Director at CedarBridge Partners and a member of the association’s Steering Committee, said: “Over the past 7 years, the industry has evolved and matured. It peaked and declined. Some of our members have reached global prominence, and others have withered and closed down. But the industry as a whole has endured and continued as a reflection of its members’ determination to prosper. This collective persistence to thrive will be translated sooner or later to a reversal in the current trends.”

The Saudi Gazette 2013, Jul 08 2013