Could the second half provide new opportunities in private equity?

With subdued deal activity over the last year, private equity firms in the Middle East have largely been focusing on adding value to their portfolio companies rather than new investments. As a result, there's been very little appetite to hire, but this could change going into the second half of 2010.

Private equity firms in the Gulf raised just $1.06bn in 2009 (compared to $5.4bn in 2008) and investments totalled a meagre $561m (against $2.72bn in the previous 12 months), according to new figures from the Gulf Venture Capital Association (GVCA).

But this arid landscape has begun to look a little more fertile recently.

"In the second quarter of 2010, opportunistic investors have been actively looking at transactions in a number of sectors. From virtually no deals throughout 2009 and into the first quarter of 2010, the upturn has been surprisingly fast-paced," said Vikas Papriwal, KPMG's UAE country head of private equity and sovereign wealth funds.

Private equity firms have been forced to change their tack in terms of the sectors they target. Whereas previously real estate and financial institutions would have been their mainstay, funds are switching towards healthcare, education and utilities, suggests the GVCA report.

Recent investments by NBK Capital, The Carlyle Group and Gulf Capital illustrate this trend.

Unfortunately, this has yet to translate into an appetite to expand among private equity funds in the Gulf.

"There has been very little recruitment from private equity funds in the Middle East this year," says Bill Allum, managing director of executive search firm Execuzen. "The exception is some sovereign wealth funds, which have been hiring for their direct investment teams."

There have been a few exceptions. Standard Chartered, for instance, unveiled Taimoor Labib as its new head of Middle Eastern private equity and Partners Group kick-started a new Dubai office in May.

It seems likely that career opportunities will emerge later this year if sentiment continues to improve, however. Certainly there's no shortage of liquidity, with private equity funds in the region sitting on an estimated $10bn of non-invested money, according to GVCA.

The demand is also unlikely to be restricted to frontline investment staff. A separate study by INSEAD and Booz & Company suggests the new environment will require stricter due diligence processes. This could create a need for compliance, governance and regulatory specialists.