Key role for ME private equity firms
Manama, July 21, 2010
In order to take advantage of Middle East opportunities this year and beyond, private equity firms must act as active owners.
They have to provide more support to their portfolio companies, helping with strategic and market positioning, financial discipline and filling the management gap, according to a survey by Insead, a leading international business school, and management consultants Booz & Company.
'Private equity in the Middle East has evolved to play a critical role in the region by injecting cash, human and logistic resources, and managerial and technical assets into local businesses,' said Insead's global private equity initiative director Laura Morales.
'It is also closely tied with the transition of family businesses to corporate structures and the development of regional regulation.'
The private equity industry in the Middle East has grown remarkably quickly for an industry that barely existed a decade ago.
Today, there are some 150 funds in the region with a further 10 announced and an additional four in various stages of planning.
However, private equity as an asset class in the Middle East is relatively new and, on a global scale, still very small.
As in the rest of the world, much of the regional private equity activity is driven by closed networks, resulting in restricted information flow, yet in the region this is particularly acute given the predominance of family businesses, and traditional ways, this has the effect of making available data.
'The results of our survey have provided unique insights into the private equity market in this region on which little formal research has previously been done,' said Insead research fellow Dr Deborah Schlichting.
'The findings will open up future avenues for inquiry in what we hope will become a focal study point for the benefit of the region.'
Regional macroeconomic indicators in early 2010 suggest that a recovery has begun.
Gross domestic product is expected to grow 3.5 per cent in 2010 as the region's economy emerges from the downturn.
There is an estimated $11 billion of investable funds in the region mostly raised before 2008 which are expected to be deployed over the coming months.
Yet, the true value of these funds will likely be lower, according to the report entitled Private Equity in the Middle East: A Rising Contender in Emerging Markets.-TradeArabia News Service