Data & Intelligence

Assessing the Impact of Declining Oil Prices on EM PE – Two Views from MENA

Amjad Ahmad, Chief Executive Officer, NBK Capital Partners

Are you seeing the decline in oil prices impacting your portfolio companies?

We are definitely recalibrating capital expenditures and focusing on strengthening the core business of each portfolio company. Our portfolio companies are well capitalized; therefore, we are reviewing several bolt-on opportunities during this challenging period. Given the social pressures, I do not believe regional countries can afford to stop their investment programs in the short-term; however, reality will set in if they experience persistently low oil prices. With diminishing surpluses or in certain cases deficits, everyone will scale back to some degree. The spending rate of the past several years cannot continue indefinitely. The consumer is feeling a bit jittery, and many would rather wait and see what happens during 2015. Everyone is taking a deep breath given the uncertainty, especially in the Gulf.

It is important to note that the fundamental investment thesis of the region has not changed; therefore, this is an opportune time to invest if you have a long investment horizon. Business owners are nervous about the next few years, leading some to consider monetizing their businesses at a time when pricing pressure has subsided given the negative sentiment and the considerable drop in public markets over the last few months.

Nabil Triki, Co-Head of Private Equity, Swicorp

Do you think the recent decline in oil prices will lead to a shakeout in the region’s private equity industry?

Following the consolidation that took place in the MENA region as a result of the 2008-2009 global financial crisis, there is not much left to shake. If you look at the Middle East, where oil prices have a huge effect, there are maybe ten GPs who manage significant amounts of money. And all of those firms have gone through the cycle, and are now much more experienced and mature than they were a decade ago.

I think the decline in oil prices will change valuations, and will therefore create an interesting environment for investors. Given the liquidity and growth in Saudi Arabia, the United Arab Emirates and Qatar over the past few years, stock market indices have developed enormously in the past two years, and asset prices have increased quite a bit. If the recent decline in oil prices lasts, it will have an impact on valuations and could potentially create opportunities for investors like us in these markets.

Read More  Views from the Field on Assessing the Impact of Declining Oil Prices on Emerging Markets Private Equity, including:

The LP View
Richard Rincon, Investment Officer, EM PE, UTIMCO

The Global View
Erik Bethel, Managing Director, Darby Private Equity

The View from Russia
Mike Calvey, Founder and Senior Partner, Baring Vostok Capital Partners

The View from Southeast Asia
Andrew Affleck, Managing Partner, Armstrong Asset Management

The View from Nigeria
Cyril Odu, Executive Partner and Head of Energy, African Capital Alliance

Two Views from MENA
Amjad Ahmad, Chief Executive Officer, NBK Capital Partners, and Nabil Triki, Co-Head of Private Equity, Swicorp

EMPEA represents the leading global investors in EM. I look forward to working alongside to drive much-needed capital for financing entrepreneurs and businesses worldwide.

Renuka Ramnath | Founder, Managing Director & Chief Executive Officer, Multiples Alternate Asset Management Private Limited

EMPEA plays an important and energetic role across the markets it represents, driving outreach and research initiatives, and promoting the role of private capital.

Brian Lim | Partner and Head of Asia and Emerging Markets, Pantheon Ventures

The developed markets have no equivalent to the role EMPEA is playing as a convener and source of trusted information in the emerging markets.

David Rubenstein | Co-Founder and Co-Executive Chairman, The Carlyle Group

I’m honored to join fellow industry pioneers in the leadership of an unparalleled network, filled with first movers, shaping the future of industries and communities.

Dr. Andrew Kuper | Founder and CEO, LeapFrog Investments

EMPEA's market and industry intelligence opens doors to new sources of capital.  I look forward to the future success of EMPEA and its members.

Torbjorn Caesar | Senior Partner, Actis

While there are certainly challenges for the industry, the opportunities abound in our target markets and globally, making a global association like EMPEA more relevant than ever.

Drew Guff | Managing Director & Founding Partner, Siguler Guff & Company