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Private equity firms in the Middle East are focusing more on creating value within their existing portfolio companies, as opportunities for new investment are harder to come by and the economic slowdown makes it more difficult to make a quick profit. This is creating plentiful job opportunities for operational specialists.
“Firms are looking for a credible sponsor for the longer term,” Mustafa Abdel-Wadood, managing director at Abraaj Capital, said. “Now is not the time for private equity firms to exit, it’s a time to look at portfolio companies and explore opportunities to take them to the next level.”
Imran Saleem, head of financial services at Egon Zehnder International in Dubai, says private equity firms have shifted their focus.
“Previously, as valuation multiples were increasing in the Middle East, most private equity companies in the region were able to buy and sell investments relatively quickly without the need to significantly restructure the underlying investment,” he says.
“However, private equity companies have now to derive greater value from their underlying portfolio – this has led to greater demand for good operational turnaround specialists at the executive level.”
Heahunters tell us that private equity firms are looking to recruit chief financial officers, chief operation officers, risk managers and even HR and IT professionals, to see where value can be added to the portfolio companies.
Research by Financial News reveals that while there is a glut of capital in the Gulf region, deals are still hard to get, mainly due to the proliferation of family-owned businesses who are reluctant to sell to private equity firms.
Abdel-Wadood believes that this new focus on developing portfolio companies could open new opportunities for private equity firms.
“A solid financial backer may be a good value proposition for many of these companies,” he said at the Dubai International Finance Centre Conference. “The right manager will guide firms through these times and bring them out ahead of competing companies.”
Realising value through operational excellence never went away but leverage offered an opportunity that while limited in scope, was still irresistible. While it lasted, structuring skills were best rewarded.
Now, however, is the the time for leaders who have experience of running companies successfully. If they are willing to take an equity risk as part of their remuneration, the rewards will return to hands on CEOs.