Dubai International Financial Centre (DIFC).The UAE and Egypt led the number of investments for the Mena region accounting for 20 per cent followed by Lebanon (18 per cent). Image Credit: Virendra Saklani/Gulf News Archives

Dubai: The UAE continues to be a popular destination for private equity investments due to the size and dynamic nature of the economy, according to according to the 8th annual report of the Mena Private Equity Association, a non-profit organisation supporting and developing the private equity and venture capital industry in the region.

The UAE and Egypt led the number of investments for the Mena region accounting for 20 per cent followed by Lebanon (18 per cent).

The private equity industry in the Middle East and North Africa region reported flat growth in 2013. Based on disclosed information, the number and total value of deals have seen a slight decrease compared to 2012. The fundraising environment remained challenging with a decrease in total funds raised during 2013 compared to prior year. This is attributed to the consolidation of the private equity industry and the unrest in the region.

Total number of investments decreased to 66 in 2013 from 101 in 2012. Average investment size in 2013 has been stable at $15 million with continued focus on venture capital (VC), growth capital and SME investments.

The industry raised $744 million funds in 2013 compared to $863 million in 2012, marking a decline of 14 per cent. However, average close per fund increased to $74 million in 2013 compared to $43 million in 2012, reflecting the consolidation trend among funds where fewer funds are able to raise bigger amounts.

The fundraising community in the Mena region remains optimistic to close the funds announced in 2013 worth $2.6 billion. In 2013, total number of private equity investments completed by Mena PE funds dropped by 35 per cent to 66 with an average investment size level at $15 million

“The private equity activity in 2013 continued to be impacted by the sequence of the crises in the region starting with 2008 and until today. Nevertheless, the fact that the industry can still raise and successfully invest hundreds of millions every year is a testimony of resilience of the industry in an adverse environment,” said Imad Ghandour, Managing Director at CedarBridge Partners and a member of the Association’s Steering Committee. 

Key sectors

Key sectors such as Information technology, media, telecoms (TMT), and healthcare sectors have seen an increased volume of investments. Information technology accounts for 30 per cent of the total investment volume in 2013 with the majority as venture capital. Other sectors such as oil and gas and healthcare account for nearly 26 per cent of the total investments by volume in 2013.

During 2013, Capital markets have shown signs of improvement in the IPO activity, with a number of Mena-based companies listing on the foreign stock exchanges. These included Al Noor Hospital (Ithmar Capital) and Gulf Marine Services (Gulf Capital) on the London Stock Exchange and Sotipapier (Swicorp) on the Tunis Stock Exchange.

“2013 continued to be a challenging year for the PE and VC industries in the region. The medium to long-term outlook for the PE and VC industries in the region is positive. With the ongoing slowdown of the more mature markets in the West, the Mena region is likely to remain the region of opportunities and a hub for Private Equity as its strong macro-fundamentals continue to drive the region’s economic recovery,” said Vikas Papriwal, Partner and UAE Country Head for Private Equity and Sovereign Wealth Funds at KPMG.