Dubai: The value of disclosed private equity investments decreased to $1.49 billion last year from $1.57 billion in 2014 as the number of deals rose by a 100, reaching 175 during the same period last year according to the MENA Private Equity & Venture Capital Annual Report.
Notable transactions included the investment by the Abraaj Group and global private investment firm, TPG, into the Saudi Arabian restaurant group, Kudu; Standard Chartered Private Equity leading a $175 million consortium investment in FINE, the Jordan headquartered tissue manufacturer and the Warburg Pincus and General Atlantic’s acquisition of Abraaj Group’s 49 per cent stake in Network International.
Fund-raising in the region remained challenging last year due to economic headwinds, geopolitical factors and the absence of a track record for some players. The number of funds raised during 2015 stood at 12, with three funds in excess of $100 million.
“Although recent emerging market volatility may make fund-raising challenging, it also creates attractive investment opportunities, especially in defensive sectors such as health care that benefits from solid long-term fundamentals,” 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.
The largest MENA focused fund raised was the Abraaj Group’s $375 million Abraaj North Africa Fund II, a mid-market focused fund, targeting both majority and significant minority stakes. Other major funds raised included the $300 million Egypt focused Duet-CIC Egypt opportunities Fund.
The report showed that average deal sizes remained small with only 14 transactions that exceeded $25 million last year. The decline in oil prices has largely led private equity investors to steer clear of the sector for the time being.
Overall investment volumes were led by the UAE accounting for 35 per cent, partly because of the increased levels of venture capital activity. Saudi and Lebanon followed each accounted for 14 per cent of the investment volumes.
Last year was a remarkable year for venture capital in the MENA region recording a threefold increase in disclosed numbers of transactions to 122 with investment values exceeding $100 million. UAE recorded significant increase in the number of venture capital deals reaching to 50, followed by Lebanon and Saudi Arabia with 22 and 17 deals respectively. Major transactions included $60 million fund raised by Careem, the app based car service.
In 2015, Saudi Arabia led the region in investments by value. Egypt also witnessed a significant increase; however, security and foreign exchange instability were major concerns for investors. Turkey, Jordan and Tunisia showed increased investment levels over 2014.
While IPO exits continue to be challenging, the annual report said a number of exit transactions were realised through sales to strategic investors. Major transactions included The Abraaj Group sale of its 49 per cent stake in Network International and TVM Capital’s exit from its investment in ProVita International Medical Center.
Deal trends seen in 2015 are expected to continue in 2016, with fund managers continuing to indicate a strong preference for consumer driven, defensive sectors and is likely to provide further opportunities to deploy capital effectively.