Private equity may save the Middle East’s M&A market. Or so says a Reuters article which notes that mergers and acquisitions volume in the region fell 43 percent in 2011 to $10.1 billion, while fee income from advising clients on deals fell 37 percent to $221 million.
While last year the Middle East saw just one major private equity deal – the $336 million sale of Dubai's Maritime Industrial Services by Abu Dhabi-based Gulf Capital and Saudi Arabia's Amwal AlKhaleej to London-listed Lamprell – 2012 brings signs of a pickup. Recent announcements include:
- Abu Dhabi-based Centurion bought a 40 percent stake in the regional foreign exchange UAE Exchange in a deal worth $2 billion.
- Egyptian private equity firm Citadel Capital areed to sell National Petroleum Co. Egypt to the Canadian-listed Sea Dragon Energy in a $147.5 million deal.
- Carlyle bought a 42 percent stake in Saudi Arabia's Alamar Foods, the master franchise operator for Domino's Pizza and Wendy's restaurants in the Middle East and North Africa.
Reuters explains the trend: Perceptions of companies' values among buyers and sellers diverged dramatically during the global financial crisis, and widened further after last year's Arab Spring uprisings introduced political uncertainty into the equation.The gap is now closing, partly because of growing optimism about Gulf economies' ability to weather the global crisis and partly because North African countries hit by the Arab Spring have held democratic elections smoothly, even though full political stability has not yet been achieved, industry executives say. That is encouraging deal flow.
Also, private equity funds have been sitting on cash for a long time and are under growing pressure to deploy it in investments. There is pressure from shareholders to monetize some of their existing investments.
If you're interested in exploiting this opportunity, you may want to read one of our guest commentaries that discussed how one investment banker switched to private equity.
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