Middle East & North Africa

Middle East & North Africa Q3 2017 Insight

Amid sharp year-on-year declines in both fundraising and investment in MENA, venture capital (VC) is proving to be an increasingly critical part of the region’s private  capital landscape. With overall fundraising declining 48%, year-on-year, to just US$228 million, VC funds accounted for 16% of all funds raised, up from 7% in 2016. Furthermore, VC investment represented 11% of capital invested, but 61% of deals completed, including eight of 11 deals in Q2 and four of five in Q3 2017. These VC deals are increasingly concentrated in the countries of the Gulf Cooperation Council (GCC), which have accounted for the majority of VC deals so far this year, as well as the region’s prominent exits. In late Q2, IFC Asset Management Company and Tiger Global Management exited online retailer to Amazon, and more recently the Abraaj Group sold its stake in UAE-based ridesharing platform Careem amid a US$500 million investment round by Daimler and Saudi conglomerate Kingdom Holding. Kingdom Holding has been particularly active in VC, both within MENA and in Silicon Valley. However, recent political turmoil within Saudi Arabia and the GCC may put a damper on the region’s budding VC activity.

View all Q3 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.