US
This has been a year of pessimism for the Middle East’s private equity industry, during which firms sat on existing portfolios and the number of new deals crashed. Now, however, there are signs that activity is about to kick off again, and with it comes a renewed appetite to hire.
MENA private equity funds closed just 12 deals to September 2009, down from 34 for the comparable period last year, according to data from Dealogic. But, after a tough year, sentiment is beginning to take a more positive slant.
“The situation has been getting better. You can feel it and hear it, particularly talking to people in the region. People are feeling more positive, they have more money in their pockets,” said Makram Azar, the chief of KKR for the Middle East at an industry conference in Dubai.
What’s more, in Deloitte’s latest quarterly survey into MENA private equity activity, 78% of respondents said they expected the number of deals to increase significantly in the next 12 months.
There are some slight signs that the recent hiring freeze is beginning to defrost. Citadel Capital has just unveiled Mohsen Mansour as vice president, one of five recent hires, and Dubai- based Rasmala Investments recruited Michael Kidd this month as its new head of private equity.
Bill Allum, managing director of headhunters Execuzen, says: “There’s a growing sense of optimism – even among the firms which have struggled for liquidity this year and simply managed existing portfolios. However, there have also been a number of firms that only recently started focusing on the MENA region, and which view this as an opportunity to expand.”
Kohlberg Kravis Roberts kick-started its Dubai office in May, and the Carlyle Group added to its 12-strong MENA team around the same time. More recently, D.E Shaw, which includes venture capital among its activities, opened an office in the DIFC.
“The air of uncertainty hanging over IPO markets gives the PE industry reason to believe that companies needing funds to expand or to refinance bank debt will turn to private equity in increasing numbers in the coming year,” said Chris Ward, CEO of Deloitte Corporate Finance in the Middle East.
“Hiring managers are putting feelers out and meeting with potential candidates. When the upturn happens, there will be a renewed battle for talent,” says Nick Careless, managing director of recruiters AP Executive.
But, for all the optimism, there are tales of caution. Abraaj Capital, the region’s biggest private equity firm, is considering reducing the size of its buyout fund, as investment is hard to come by. Meanwhile, other players are warning of a raft of company failures in the region.
the problem with private equity offerings in the region is that it is focussed mainly on real estate and sometimes financial industries (if any). however there are so many profitable sectors such as oil and energy that have not ventured into PE market yet. True this is due largely to the fact that this sector requires huge capital to be invested which is usually expected of governments in the region to expend on them. It is time that large pool of funds are directed into this area.