Egypt Likely to Lead Mideast Private Equity Rebound, Report Says


July 2014

The private equity sector in the Middle East and North Africa has been experiencing a rough ride since the global financial crisis engulfed the region five years ago.

Last year was no different with the total number of private equity deals in the region declining to 66 from 101 in 2012, while the total value of those investments fell to $0.7 billion from $0.9 billion, according to the MENA Private Equity Association’s annual report on the industry.

The sector’s vulnerabilities have been well-documented: company owners are reluctant to sell in the hope the economy will improve and the funds are finding it difficult to offload assets as initial public offerings and overall deal activity remain lackluster.

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,” said Imad Ghandour, managing director at CedarBridge Partners.

One of the side-effects of the lack of large buyout transactions is an increase in investments in venture capital and small-to-medium sized companies in recent years.

Despite the sluggish numbers, the report’s authors argue that investment activity is on the rise again. Egypt, in particular, could lead the sector’s rebound as it continued to be one of the top attractive PE destinations last year despite the political transition that took place there.

As the country transitions towards regaining political stability, PE deal activity and value of investments made are gradually expected to return to levels experienced prior to 2011, the report said.

Here are some highlights of the MENA private equity & venture capital report:

Total number of investments fell to 66 in 2013 from 101 in 2012. The average ticket size in 2013 remained at $15 million as focus remains on venture capital, growth capital and SME investments.

Funds in the region in 2013 raised $744 million, a 14% decline compared to 2012. However, average fund size increased as a result of consolidation in the industry.

United Arab Emirates and Egypt attracted most investments in the region (20% each) followed by Lebanon (18%). The three countries accounted for half of the region’s investments in 2013.
Information technology accounted for 30% of 2013 investment volumes. Oil and gas, healthcare represented 26% of investments. Construction, real estate and financial services witnessed a drop in activity in 2013.

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