Middle East & North Africa Year-End 2017 Insight

Year-on-year declines in fundraising and investment totals in MENA suggest at first glance that the region’s private capital industry is struggling. However, recent events indicate that the region may instead be at an inflection point. While overall fundraising decreased 15%, year-on-year, to US$516 million, 11 funds in the region reached a close, including six first-time funds–up from just two last year. Many of these new GPs are raising venture capital (VC) funds, a strategy that has grown in MENA from a few transactions earlier in the decade to 22 deals totaling US$60 million in 2017. These new GPs will be encouraged by recent large technology exits, including Amazon’s acquisition of online marketplace Souq and Kingdom Holding and Daimler’s purchase of regional Uber rival Careem. GPs also found liquidity through public markets. In total, GPs exited six companies via public exchanges in 2017, all of which were headquartered in North Africa. Coupled with increased fundraising—including closes of US$163 million and US$123 million for follow-on vehicles by AfricInvest and Mediterrania Capital, respectively—North Africa’s private capital ecosystem appears to be carrying momentum into 2018.

View all Year-End 2017 Data Insights here.

Private Equity in the Middle East & North Africa

Having begun in the late 1990s, the private equity industry in the Middle East and North Africa has a shorter history than most emerging market regions. In its earliest days, the asset class received a significant amount of interest from local—primarily GCC-based— limited partners, which led to a large number of first-time funds raising a sizable amount of capital in a short amount of time. In 2007, more than US$6.2 billion was raised by funds dedicated to investing in the region. However, the party proved to be short-lived; with the onset of the global financial crisis, the asset class nearly disappeared as quickly as it had emerged. By 2009, fundraising had slowed to just over US$700 million, a drop of over 82% from the prior year. Amitava Ghosal, a Partner with Al Masah Capital Limited, notes, “The 2008 global financial crisis was a sobering experience for many firms. The worldwide downturn from 2009 to 2010 resulted in a shakeout of the industry; the most serious players have survived, but many of the small funds have wrapped up their operations and closed shop.”

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Amendments to Foreign Fund Private Placement Exemptions in the UAE

In August 2016, the Emirates Securities and Commodities Authority (SCA), the federal securities regulator of the United Arab Emirates (UAE), adopted new investment funds regulations (the 2016 Fund Regulations), which repealed the prior funds regulations adopted in 2012 and amended in 2013 (the 2013 Regulations). This clarified the formation process for the establishment of locally domiciled funds and introduced significant changes to the marketing of foreign domiciled investment funds in the UAE. The 2016 Fund Regulations impose substantial hurdles and costs for managers seeking to promote foreign funds in the UAE and have generally been subject to negative feedback.

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10 Tips for Private Equity & Venture Capital Transactions in the Middle East

In this article King & Spalding set out some of the common issues faced by parties, particularly PE and VC investors, purchasing Middle East-based companies in the popular healthcare, education and food and beverage sectors with a focus on companies in the Kingdom of Saudi Arabia and the United Arab Emirates (UAE).

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Navigating Islamic Private Equity: An Interview with Fajr Capital’s Iqbal Khan

Iqbal Khan is the Chief Executive Officer of Fajr Capital, a Dubai-based principal investment firm with a focus on strategic, high-growth sectors across key Organisation of Islamic Cooperation (OIC) markets. Fajr Capital’s shareholders include sovereign investors from Abu Dhabi, Brunei and Malaysia, and private investors from the Gulf and beyond.

In this interview, Mr. Khan provides an overview of the evolution of Islamic private equity, and discusses both what factors distinguish Islamic private equity from conventional private equity and what global investors interested in the growing markets of institutional investors in the OIC world should pay attention to in the coming decade.

Read the full interview here. 

Private Equity in the Maghreb: An Interview with Albert Alsina of Mediterrania Capital Partners

Albert Alsina is the CEO and Managing Partner of Mediterrania Capital Partners, a private equity firm focused on small- and medium-sized enterprises (SMEs) and mid-cap companies in North Africa with total assets under management of more than US$200 million. In this interview, Albert discusses the opportunity set available to private equity investors in North Africa, the role of regional integration in promoting investment, and why global firms are paying increasing attention to these markets.

Read the full interview here.