Private Equity in the Middle East: Gathering Strength as New Opportunities Unfold
Two major upheavals have rocked the Middle East and North Africa (MENA) region in recent years. The global financial crisis of 2009 slowed the rapid economic growth that the region had been enjoying, while the turmoil that has swept from Tunisia to Bahrain — the so-called Arab Spring — has shaken the political landscape. In this four-part special report, experts at Wharton and Amwal AlKhaleej, a leading Middle East-focused private equity firm, and other analysts explore the outlook for private equity across MENA in light of these developments. While the financial crisis slowed the expansion of private equity deals, the improving economy will open up fresh opportunities for investment over the long term, particularly for firms with close ties to the region. In the short run, however, while the political situation remains uncertain, investors will likely favor more liquid assets.
The Middle East and North Africa: A Region Gathering Strength
The Middle East and North Africa region has been largely rebounding from the surprisingly sharp tailspin that rocked the oil-rich area during the global 2009 recession. Boosted by higher oil prices, improving capital markets and gradual growth in lending, governments are pursuing aggressive spending plans and courting foreign investment to spur job creation. At the same time, the economic impact of the political turmoil that has swept across the region — from Libya to Bahrain — remains highly uncertain.
Overcoming Barriers to Successful Private Equity Investments
Unique challenges face private equity investors in the Middle East and North Africa. While the region’s economic growth rate is expected to surpass that of developed countries and create attractive opportunities long term, it is essential to recognize the unique challenges that private equity firms face. These include issues around transparency, family and government politics, regulation and weak corporate governance. The key to success is knowing how to overcome them. Still, in the short term at least, political instability is leading investors to favor more liquid asset classes.
Targets of Opportunity: The Region’s Top Investment Sectors
In a region that stretches from Morocco to Kuwait and covers terrain from mountains to desert, the range of economic activity in the Middle East and North Africa is as varied as the geography. The rich diversity of economies provides numerous sectors primed for private equity investment.
All in the Family: The Key to Investment Is Dealing with Family Owners
Business is largely a family affair throughout the Middle East and North Africa region. Operating successfully in this environment requires private equity firms to master the art of making family owners comfortable with selling a stake in their enterprises and working with new partners.