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Experts: Private Equity Has More Growth Potential in the Middle East 

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June 3, 2015

Experts believe appetite for private equity remains strong in the Middle East and North Africa and believe the private equity industry in the region is ripe for further growth. But analysts also told in the recent debate that the region’s private equity industry still has some room for improvement in terms of financial reporting and transparency.

 

The ICAEW Debate
A recent private equity forum organised by the Institute of Chartered Accountants in England and Wales (ICAEW) at the Corporate Finance Faculty in the United Arab Emirates looked at the industry in the region. Most speakers at the debate said the industry has matured immensely in recent years.

 

According to the experts, Middle East and North Africa (MENA) have seen private equity deal volumes and values improve. The deal structures in the MENA region have also matured.

 

Alexander Gross, director at Merrill DataSite, was quoted in Zawya saying, “We have seen more maturity in private equity industry in recent years with sellers better understanding the value these transactions can bring beyond just capital raising.”

 

“Family-owned businesses, in particular, are looking for ways to grow and expand regionally or internationally and they too are becoming more sophisticated in how they structure and govern their businesses in order to attract private equity investors,” Mr Gross continued.

 

The Remaining Challenges
Despite the positive growth, there are still some issues that need solving. Most of the panellists speaking at the debate believe there are some compliance and regulatory issues that need more focus.

 

Furthermore, private equity representatives told the audience there is a valuation gap across the regional market, and this can hinder long-term prospects.

 

Michael Armstrong, ICAEW’s regional director for the Middle East, Africa and South Asia, was quoted in Khaleej Times, “Appetite for private equity in the region remains healthy…Once businesses improve their quality of accounting, financial reporting and corporate governance procedures, they will become even more attractive to overseas private equity firms.”

 

On top of this, many experts are wary of the unstable geopolitical situation, which currently increases the risks for private equity deals.

 

Some Sectors Are More Interesting
In terms of finding funding, local banks are still playing a big role in private equity deals in the region. International institutions still have not been able to gain a larger role in the sector.

 

When it comes to sectors that attract the most interest, retail and healthcare remain on the top spots. Many international firms have been attracted to the region, especially through the opportunities in these two sectors.
Furthermore, experts at the debate agreed private equity rewards in the region are especially lucrative. This was explained to be down to the availability of wealth combined with the ambitions of the younger generations and the plethora of available business opportunities.

 

The increased wealth is something PE funds are also hoping to tap into. Think Advisor recently reported Preqin’s latest findings, which showed 21% of private equity and venture capital firms scouting for investors from the MENA region.

 

It remains interesting to see how private equity in MENA region continues to develop and whether the industry manages to expand in 2015.

 

If you are looking for deals in the region, check out the DealMarket platform.

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