The bank believes that global companies with cash reserves set aside for investment are set to compete with private equity (PE) houses for the most lucrative investment opportunities in the region. This belief has been fuelled by the bank’s own activities, as they are believed to be working on a number of deals that will see them establish a strong investor presence in the Middle East region.
Wadih Boueiz of The Bank of America told The National, “If you are a strategic investor trying to access emerging markets and the Middle East in particular, it’s a good time to be buying. M&A in the region is not limited to wealth funds and state entities investing in cross-border situations.”
Why is the Middle East Attractive Again?
Now that many companies with existing investments in the Middle East region have started to see an improvement in the political and economic situation, others are taking a fresh look.
Economic growth has returned to the region, while financial markets have also stabilised. As an indicator of the competition PE houses are likely to face in the region, electronics giant Philips have recently agreed to purchase a stakeholding in General Lighting, of Saudi Arabia.
On the PE side, New York headquartered Warburg Pincus made its first Middle East investment in April 2014, buying a Dubai-based aviation software business, which was previously owned by Dnata, a unit of Emirates.
Another reason the region is becoming increasingly attractive to international investors is that funds based in the Middle East are spending a lot of their own time looking for their own opportunities around the world. While they have traditionally been strong at home and in Europe, these funds have realised that they need to diversify, and in particular are targeting the United States and numerous East Asia markets.
This has led to the emerging opportunities in the Middle East being ripe for investment from those coming into the region for the first time.
Boueiz, speaking specifically about the strategies of the Middle East headquartered funds, said, “After a while, there is only so much real estate or stakes in banks or retail that one can add to its portfolio [at home and across Europe]. We expect them to continue looking at the US and also seek opportunities in Asia.”
While Boueiz has looked at very specific industries in his analysis, it is unlikely that investors heading to the Middle East for the first time will be looking only at these areas. After all, most of the opportunities here will already have been exploited, and it is likely going to be difficult for those entering the market to compete with names that are already dominant, though a business with a great offer and a unique selling point could still succeed.