Thursday 15, June 2017 by Jessica Combes

MENA Private Equity Association launches 11th report


The MENA Private Equity Association, a non-profit organisation supporting the development of the private equity and venture capital industry in the Middle East and North Africa, has launched its 11th MENA Private Equity & Venture Capitalem> Annual Report.

The report was launched in partnership with Deloitte and Thomson Reuters and was sponsored by Dubai International Financial Centre (DIFC), TVM Capital Healthcare Partners, and Morgan, Lewis & Bockius.

“We are very pleased to continue our collaboration with The MENA Private Equity Association in this report which represents the most comprehensive annual market assessment of the state of the MENA PE and VC market,” said Sam Surrey, Principal Director, Financial Advisory, Deloitte.

The report notes that 2016 marked divergence between trends in private equity and venture capital than has been seen in previous years. The overall number of deals increased, as venture capital investment levels continued to grow. The decline in the number of higher value private equity transactions led to a decline in the total value of investments made.

Key highlights: 2016 Private Equity and Venture Capital in the Middle East Annual Report
The upsurge trend in investment activity continued in 2016. Disclosed transactions reached 244, recording the highest since 2008. However, the value of disclosed investments decreased by 25 per cent to $1.1 billion; a reflection of the more challenging investment environment. Notable transactions included Careem, the UAE headquartered regional provider of transportation solutions, raised $350 million in 2016.

Fundraising in the region remained challenging due to economic headwinds and geopolitical factors. Seven funds were raised in 2016. The number of closes declined to nine and funds raised were at a low of $582 million.

The largest MENA focused fund raised was the Gulf Capital’s $250 million Gulf Credit Opportunities Fund II, a mid-market-focused debt fund. Other major funds raised included the $110 million NBK Mezzanine Fund, also focused on providing credit solutions for investee companies.              

2016 recorded 10 disclosed transactions in the MENA region with an investment value greater than $25 million, compared to 14 identified in 2015.

The UAE attracted 62 per cent of MENA investment activity by value in 2016, a substantial increase from 2015. This is due to stability and availability of large and quality assets. Uncertain market conditions in the region attracted fund managers towards investing more in the UAE.       

UAE was also the largest market in 2016 In terms of volume of deals (accounting 34 per cent) followed by Lebanon.

While investments in the oil and gas industry continue to decline, transport was the largest sector in terms of investment value in 2016, as seen by Careem, raiding $350 million. Global trends in ecommerce, developments in Fintech and other disruptive technologies including the move towards a more cashless economy, are combining to drive entrepreneurship.

Investment sentiment continues to favour consumer driven sectors such as retail, healthcare and food and beverage. Education related businesses are also popular. 

Divestment volumes decreased to 14 in 2016 from 21 in 2015. Total divestment value stood at $462 million. Lengthy holding periods and the slowdown in recent years have depressed internal rate of return (IRR) on portfolio investments.           

2016 saw the continued development of venture capital as an asset class in the MENA region. There were a number of significant transactions in the year for venture capital backed businesses.

The UAE led venture capital activity, followed by Lebanon, Egypt and Saudi Arabia.         

“As the regional economy continues to develop and grow, private equity has an important role to play in helping good companies become great ones. This year’s Report has shown a particular increase in appetite for investments in technology-related sectors, such as IT, fintech, and E-commerce. This is a space the Centre will continue to develop via enhancements to our funds platforms and regulations, as well as initiatives such as fintech Hive at DIFC, the region’s first fintech accelerator. The DIFC, as a global financial centre, is committed to supporting private equity, whether in traditional sectors or more early stage growth segments focusing on innovation,” said Salmaan Jaffery, Chief Business Development Officer at DIFC Authority.

The promotion of the venture capital industry has become increasingly prominent, with numbers of incubators and accelerators increasing, alongside a developing legislative framework. Significantly, this in part reflects a government led emphasis, notably in the UAE and Saudi Arabia. The aim is to reduce reliance on the oil and gas sector and foster the development of entrepreneurialism and SMEs.

“There seems to be a true grass roots entrepreneurial movement that has not only benefitted from governmental support in some countries, but also attract increasing amounts of venture capital. I firmly believe that this development will make the investment sector more active and vibrant, provides better diversification for investors and ultimately will create exciting new companies in the region,” said Dr Helmut Schuehsler, CEO of specialist Private Equity firm TVM Capital Healthcare Partners, and member of the MENA Private Equity Association’s Steering Committee.




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