Q&A with KKR’s MENA Head Kaveh Samie

KKR & Co. has been in the Middle East and North Africa since 2008. In what could be one of the largest buyout deals ever in the region, the New York-based private equity giant is jointly bidding for Kuwait’s Americana. The Wall Street Journal sat down with Kaveh Samie, the firm’s regional head and a former Citigroup executive, to talk about doing business in the region, and the challenges that come with it.

WSJ: Why have there been so few private equity transactions in recent years?

Mr. Samie: “One of the main reasons why deals fall through has always been pricing and valuation. In the private market for the past few years business owners had the 2006 valuations in their mind or already pricing in 2020 – nothing realistic. Another challenge has always been the different regulatory environment in each of the countries.

WSJ: How did the region’s upheaval affect your business?

Mr. Samie: “The political crisis really didn’t impact our business as our focus has mainly been on the GCC which was hardly affected. In a way it may have actually had a positive effect because of the following two points: one, a lot of wealth came to the GCC from those countries that had been affected. Dubai was a big beneficiary as people in troubled countries found it a safe haven. Two, before these crisis, people were looking primarily at local businesses and markets. Once the crisis happened, soon after, you could saw a flood of investments going out towards Europe and the U.S. for safety. We saw an increase in demand for the investments abroad.”

WSJ: How does the Middle East differ from for example Asia?

Mr. Samie: “Our approach is very similar to the one we took in Asia, the same characteristics exists, the majority of businesses are family-owned. These families don’t trust a big buyout firm from abroad coming and telling them how to run their businesses. This was a big challenge for us. What we need to do in the Middle East is to complete one or two transactions and change that notion people have. They need to know that we are on their side and can actually help grow their business and add value across the board.”

WSJ: What are the other big challenges you face in the region?

Mr. Samie: “The key challenges are valuations, regulations and issues with minority ownership. One challenge that is unique in this region and you don’t see in other emerging markets is that it’s highly liquid and doesn’t need the cash. We don’t go into a business without investing in it alongside our partners, but the main operational value we bring requires governance. These two combined makes it more challenging for us. You have a region that is so highly liquid and the last thing they need is the cash. This also makes the valuation process even more difficult.”

WSJ: What are the ramifications of Saudi Arabia opening up its stock market to foreign investors?

Mr. Samie: “As far as private equity firms go, anything that helps the liquidity in the market is good for us. As you know, we’ve been looking to make investments in the region for a while – we probably looked at over 30 transactions since I joined the firm. When we make an investment, thinking on how we can potentially exit is a natural part of our consideration.”

“Having another avenue such as the placement on the Saudi market was not an option previously open to us and as a foreign owner you would probably more likely think of an international exchange like New York or London. The opening of the Saudi Market gives us another very viable solution. You would hope that this will eventually also lead to a much more efficient and transparent market.”

This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.

(via WSJ Blogs)