The MENA Private Equity Association, a non-profit organisation supporting and developing the private equity and venture capital industry in the Middle East and North Africa, today launched its eighth “MENA Private Equity & Venture Capital” Annual Report. The Report, which was compiled in collaboration with KPMG and Zawya Thomson Reuters, presented a detailed review of the private equity and venture capital arena in light of the uncertainty and continued challenging environment across the region.
Overall, the private equity industry in the MENA region has demonstrated flat performance during 2013. Based on disclosed information, the number and total value has seen a slight decrease compared to 2012. The fundraising environment remained challenging with a decrease in total funds raised during 2013 compared to prior year. This is attributed to the consolidation of the private equity industry and the unrest in the region.
KEY HIGHLIGHTS: 2013 Private Equity and Venture Capital in the Middle East Annual Report
• Total number of investments decreased to 66 in 2013 from 101 in 2012. Average investment size in 2013 has been stable at USD 15 million with continued focus on venture capital (VC), growth capital and SME investments.
• USD 744 million funds raised in 2013 compared to USD 863 million in 2012, a decline of 14%. However, average close per fund increased to USD 74 million in 2013 compared to USD 43 million in 2012, reflecting the consolidation trend among funds where fewer funds are able to raise bigger amounts. Fundraising community in the MENA region remains optimistic to close the funds announced in 2013 worth USD 2.6 billion.
• In 2013, total number of private equity investments completed by MENA PE funds dropped by 35% to 66 with an average investment size level at USD 15 million
• UAE continues to be a popular destination for fund managers due to the size and dynamic nature of the economy. UAE and Egypt led the number of investments for the MENA region (20% each), followed by Lebanon (18%). The three combined account for over half of the total number of investments in 2013.
• Information technology, media, telecoms (TMT), and healthcare sectors have seen an increased volume of investments. Information technology accounts for 30% of the total investment volume in 2013 with the majority as venture capital. Other sectors such as oil and gas and healthcare account for nearly 26% of the total investments by volume in 2013. Construction, real estate, and financial services have seen a drop with continued challenges for the financial services sector in 2013.
• Number of exits completed during 2013 decreased, with number of divestments expected to increase in the short- to medium-term.
Imad Ghandour, Managing Director at CedarBridge Partners and a member of the Association’s Steering Committee, commented: “The private equity activity in 2013 continued to be impacted by the sequence of the crises in the region starting with 2008 and until today. Nevertheless, the fact that the industry can still raise and successfully invest hundreds of millions every year is a testimony of resilience of the industry in an adverse environment. I am optimistic that 2014 will reflect a healthier level of activity as witnessed by the amount of funds closed, investments made, and exits realized in the first half of 2014.
I am also encouraged by the development of the private equity ecosystem with the active support from governments. For example. the UAE has taken steps to encourage better fostering of economic activity, which is evident in the new law issued by UAE’s leadership, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, to regulate the relationship between government institutions and entrepreneurs. Through this law, the federal government is committed to have contracts with SMEs by at least 10 per cent of the total contracts of these entities. ”
During 2013, Capital markets have shown signs of improvement in the IPO activity, with a number of MENA-based companies listing on the foreign stock exchanges. These included Al Noor Hospital (Ithmar Capital) and Gulf Marine Services (Gulf Capital) on the London Stock Exchange and Sotipapier (Swicorp) on the Tunis Stock Exchange.
According to Vikas Papriwal, Partner and UAE Country Head for Private Equity and Sovereign Wealth Funds at KPMG, “2013 continued to be a challenging year for the PE and VC industries in the region. Whilst the industry in general continued to invest cautiously favouring the non-cyclical and defensive sectors, such as oil and gas and healthcare, investors are increasingly broadening their focus across a range of sectors including food and beverage and leisure and tourism – the two largest sectors of investment by value during 2013.”
Vikas added, “The medium to long-term outlook for the PE and VC industries in the region is positive. With the ongoing slowdown of the more mature markets in the West, the MENA region is likely to remain the region of opportunities and a hub for Private Equity as its strong macro-fundamentals continue to drive the region’s economic recovery.”
+971 50 423 0537
Lina El Zein
MENA Private Equity Association
+971 50 453 6030