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Signs of maturity in Middle East private equity market

UAE. The private equity market in the Middle East has matured in the last five years in terms of deal structures, volumes and values, according to speakers at a debate organised by ICAEW’s Corporate Finance Faculty in the UAE.

ICAEW members and guests gathered at Jumeirah Emirates Towers in Dubai last week (Wednesday, 20th May) to discuss private equity in the region. The event, sponsored by Merrill DataSite, was moderated by Alexander Gross, Director at Merrill DataSite.

Panellists at the event included Taimoor Labib, Managing Director and Head of Global Private Equity at Standard Chartered; Imad Ghandour, Managing Director at CedarBridge Partners; Ashish Dave, Partner at KPMG; Ahmed Osman, Managing Director at deNovo Corporate Advisors; and Mohammad Nasr, Vice President Private Equity at Gulf Capital. 

Following an introduction by Sanjay Vig, Managing Director at Alpen Capital and Chair of ICAEW’s Corporate Finance Faculty network in the Middle East, panellists and invited guests discussed how the private equity landscape in the region is developing.

Overall, the panellists agreed that there is more maturity on the sellers’ side and they recognise the value of private equity more than they did to five years ago. Previously, a lot of education was required and this in turn led to delays in transactions.

“We have seen more maturity in private equity in recent years with sellers better understanding the value these transactions can bring beyond just capital raising. They also view it as a preferable option to IPOs. Family owned businesses, in particular, are looking for ways to grow and expand regionally or internationally and they, too, are becoming more sophisticated in how they structure and govern their businesses in order to attract private equity investors,” said Alexander Gross.

Panellists noted that while international private equity firms are interested in investing in Middle Eastern businesses, compliance and regulatory aspects remain their biggest concerns.

On the subject of differences between private equity in emerging markets versus more mature markets, the panel explained that in the case of the Middle East these transactions tend to be more complex due to a lack of data, cultural and language challenges, and current inexperience of senior management in leading a company through  these large, intricate deals.

Although the speakers agreed that the rewards of private equity are high in the region, thanks to the availability of wealth, a young and ambitious demographic, business opportunities and infrastructure, they said the risks are equally high due to the unpredictable geopolitical situation.

Event attendees also agreed that governance is vital for businesses as it helps to improve performance, strengthens reputation and credibility, and best prepares them to raise capital through the different routes, whether private equity or IPOs.

“Appetite for private equity in the region remains healthy, but there is still room of improvement in certain areas such as audited financial reporting and transparency. Once businesses improve their quality of accounting, financial reporting and corporate governance procedures, they will become even more attractive to overseas private equity firms,” said Michael Armstrong, ICAEW Regional Director for the Middle East, Africa and South Asia.

The event was attended by almost 100 ICAEW members and senior business representatives from the major global and regional financial organisations.

Photo Caption: Alexander Gross, Director at Merrill DataSite

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