Harvesting Strategies for Private Equity Investments in the MENA Region

The Private Equity industry in the MENA region is still in its infancy. Substantial investments only began in 2005, and growth was cut short by the global economic downturn. One of the key difficulties that the industry currently faces is the availability of exit opportunities. Over the past few years, IPOs and trade sales have accounted for the vast majority of exits. Given that the public markets have yet to fully recover, most of the recent exit activity has taken the form of trade sales. Going forward, we believe that imminent exchange and regulatory reform has the potential to boost public market activity and re-introduce IPOs as a prominent exit channel. While rising political tensions may deter foreign investors from participating in the MENA growth story, the increasing professionalization of family businesses should lead to more trade sale exit opportunities. Secondary buyouts and management buyouts (“MBOs”), on the other hand, are not likely to capture a large share of exits in the near-term, although some growth is expected. Based on these trends, we believe that governments should take an active role in consolidating exchanges and introducing regulatory changes to attract more institutional and foreign investors. In addition, Private Equity firms should focus more on operational change in portfolio companies and educate family businesses on the value that Private Equity brings to the table.