Middle East & North Africa

Middle East & North Africa 1H 2017 Insight

Despite overall year-on-year declines in fundraising and investment of 55% and 77%, respectively, MENA’s deal count rebounded from a 23-quarter low of seven in Q1 to ten in Q2 2017, driven by seven venture capital (VC) deals. These seven VC deals represent the most recorded in MENA since Q4 2015. Indeed, VC has proven to be arguably the most interesting strategy in MENA in 2017, with two prominent exits completed in recent months. After participating in US$60 million and US$350 million rounds in U.A.E.-based ridesharing company Careem, the Abraaj Group reportedly exited its stake amid a further US$500 million investment round by Saudi conglomerate Kingdom Holding and luxury automobile manufacturer
Daimler. In early July, Amazon also completed its previously announced US$650 million acquisition of U.A.E. e-commerce company Souq from Tiger Global Management and IFC Asset Management Company, among others. These exits were completed despite the summer 2017 Qatar crisis within the GCC, but it remains to be seen whether strained relations within the alliance will have a chilling effect on its budding tech sector as well.

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.

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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.