Private equity: PE funds turn to MENA

Driven by rising oil revenues and booming economies, the number of private equity funds setting up in the Middle East and North Africa boomed until the beginning of the economic crisis. Some 100 funds focused on the region have raised $19.5 billion in capital there. However, now that stock markets have crashed, funds are finding it hard to deploy capital. "The sellers have dried up," says Fadi Arbid, executive vice-president and country head of Saudi Arabia at Amwal AlKhaleej, a MENA-focused private equity house. "Six months ago, companies were looking to sell stakes to private equity firms. Then stock markets crashed – the Saudi market has lost 60% since last August – and private equity funds have had to say to those prospective companies that the prices on the table before are no longer valid." The result has been that sellers have walked away or delayed that process. "It’s very difficult for these companies that are turning a profit and even growing, have great fundamentals, are in a steady environment, but which have seen the market caps of their public comparables wiped. To suddenly hear that they are worth perhaps 60% less today when they are more profitable is difficult to take, and unsurprisingly, they are turning away from selling."