private equity

Private Equity a Sellers Market

Private equity firms are paying an average premium of 45% for European companies in 2021, the highest since the data company Refinitiv started keeping records in 1980. In the US, the premiums hit 42% this year, the highest since 1999. UK-listed companies were taken private at an average premium of 47% this year.

Source: Financial Times, Refinitiv

Private Equity 2016 Guide Sector Report

By Suhail Ahmad, Management Consultant and Portfolio Adviser to Hikmah Capital Corp. He can be contacted at [email protected]


With falling crude oil prices, slowing Chinese economy, and a struggling Eurozone, it is no surprise the Private Equity (PE) activity in the Middle East has been challenging. However, despite these headwinds, PE activity overall looked respectable with a strong showing of $2.7 billion in deal value by end of September 2015. However total deals fell by over 50% compared to last year. Perhaps the decline in crude oil prices may have a silver lining for Islamic PE as countries reliant on oil revenue may finally see the benefits of a diversified economy and support regional PE growth to help diversify the region’s economic base.

2015 a Review

According to Al Masah Capital, a total of 24 PE deals worth $2.7 billion were reported as of September 2015 compared to a total of 58 deals worth $285.3 million during the same period in 2014. On the other hand, there were just 5 PE exit deals reported until September 2015 worth $36.21 million, compared to 16 PE exits during the same period in 2014 worth $167.43 million.

If we were to exclude the $2.64 billion deal in Algeria, the total values of deals in the Middle East North Africa (MENA) region were only $34.25 million. The slowdown can directly be attributed to the decline in oil prices and increasing geopolitical uncertainty with civil wars in Syria and Yemen.

Al Masah Capital founder and chief executive officer Shailesh Dash said: “Our experience in market research suggests a pick-up in private equity activity during H2 2015 with stabilization in oil prices especially in consumption-led sectors such as healthcare education retail and food and beverage. The UAE Saudi Arabia Lebanon and Egypt are expected to be frontrunners in private equity activity during the second half of 2015.”

Sectors like IT retail and healthcare followed by telecom financial services industrial manufacturing food and agriculture oil and gas and media observed dynamic movements in private equity during 2015.

Some of the key PE transactions this year include the Dubai International Capital (DIC), the private equity arm of Dubai Holding, announced completion the sale of Almatis, the world’s leading supplier of premium alumina for the refractory, ceramic and polishing industries to OYAK, Turkey’s largest private pension fund. The completion of sale was after receiving all relevant regulatory approvals.

The Abraaj Group was particularly active in the year with its announced acquisition of Yu-Ce Medical, a leading disposable medical supplies manufacturer in Turkey and acquisition of majority stake in Urbano Express, a leading courier and light logistics solutions company in Latin America with operations in Peru, Ecuador and El Salvador. Abraaj Group also announced the final close of its second dedicated North Africa private equity fund at $375 million and brings the total amount raised by Abraaj for the African continent in 2015 to solid $1.37 billion. The funds will target well managed, mid-market businesses in the core geographies of Algeria, Egypt, Morocco and Tunisia.

Its primary aim is to develop investments within local industries, thereby accelerating growth and economic diversification in Qatar through support for private sector.

2016 a Preview

With a strong showing in 2015, Islamic PE growth looks promising next year. The key for Islamic PE to continue growing is the emphasis of the close relationship it has with conventional PE. Particularly the concept of equity ownership, risk sharing, and mutual benefit compared to risk transfer which is still often the case in Islamic banking.

With a focus on development capital rather than leveraged buy-out (LBO) and distressed buy-out transactions, Islamic PE firms can build an attractive risk profile and differentiate themselves better from the conventional PE firms.

A good example is the new private equity offering announced by Qatar Development Bank worth almost $100 million and designed to support Qatari small-medium enterprises (SME). The goal of the fund is to actively contribute to the country’s economic diversification. The term of the SME Equity fund is expected to be up to ten years, five years for deployment and 3-5 years holding period. Qatar Development Bank (QDB) was established in 1997 as the Qatar Industrial Development Bank, a 100% government-owned developmental organization.


Islamic PE no doubt has its growth challenges but considering the increasing awareness of the benefits of PE as a source for economic growth and diversification, the industry needs to capitalize on this aspect to continue charging forward. Only then can Islamic PE be considered a formidable force for job creation and economic development in the Islamic economies of the Middle East and Far East Asia. And attract the significant capital from the Islamic institutional investors (Islamic banks and Sovereign Wealth Funds) to become a vibrant segment of the Islamic finance industry.

This article was first published in the IFN annual guide 2016

Private Equity and Venture Capital Investing in the Islamic World

Article featured in the IFN 2015 Guide (pg.44) and feel free to download the complete guide from our web-site at


Islamic private equity (PE) remains a very small component of the global PE marketbut showed signs of strength last year with an increase of mergers and acquisitions(M&A) activity in the Middle East hitting a four-year high. Islamic venture capital(VC) continues to face an uphill battle in the region but demonstrated signs ofimproved market perception and attention. SUHAIL AHMAD writes.

Global alternative investment assets reached US$7 trillion in 2014 according to Preqin’s 2015 Global Alternatives Report. PE including VC was the largest component of alternative assets with US$3.8 trillion under management, an increase of 12% over the previous year.

Review of 2014

Aggregate capital raised by PE and VC firms worldwide in 2014 was a strong US$495 billion, with 85% of the activity in North America and Europe. PE returns as measured by public pension fund holdings reviewed by Preqin Performance Analyst remained strong at just under 20% for the year and clearly beating other alternative asset classes such as real estate and hedge funds with the latter closing out 2014 with a measly 2.9% average investment return as measured by the Barclay hedge fund index.

The Middle East witnessed some strong deal-making with publicly announced M&A across the Middle East increasing 23% to reach US$50.3 billion last year, the highest amount since 2010. Despite the strong M&A activity in the region, international private equity firms were not as aggressive as expected and inbound M&A activity declined 30% last year to US$4.2 billion, according to Thomson Reuter’s data.

One of the region’s largest PE firms, Dubai-based Abraaj Capital had an active year teaming up with the US-based TPG Capital to bid for Saudi fast-food chain Kudu, although it lost out to multinational cereal giant Kellogg in a bidding war for Egyptian biscuit maker BiscoMisr.

The sector in 2014 also saw the successful fundraising of the largest PE fund since 2011 with Gulf Capital of Abu Dhabi closing its largest and third private equity fund; GE Equity Partners Fund III with a US$750 million raise. Although Gulf Capital is not a dedicated Islamic PE firm, the closing is a positive development for the region and should spur more activity in PE in the coming years.

In the VC space we expect 2014 investment levels to improve over the US$29 million in funds raised in 2013 according to the MENA Private Equity Associations 4th Venture Capital in Middle East and North Africa Report. Similar to the regional PE data, it is unclear how much of the VC deal flow was Islamic but nevertheless the VC sector in the region continues to remain embarrassingly low compared to the rest of the world which had total VC investments of US$86 billion last year including the closing of 273 new VC funds!

Preview of 2015

PE firms will be increasingly interested in the Middle East region as investors look at diversifying geographically, better valuations than in the US, and capitalizing on the growth opportunities of the young demographics of the region.

Interestingly, a series of interviews of 75 corporate executives across the Gulf Cooperation Council (GCC) in the GCC Investment Outlook report late last year revealed only 45% of respondents think that the opening up of GCC stock markets to foreign direct investments will be one of the main drivers for investment in the region. However, 51% of respondents do believe PE transactions will increase significantly in 2015.

Small mid-sized enterprises (SMEs) and start-ups that do not have access to traditional Islamic banking credit options for a lack of collateral or operating history are desperate for an increase in venture capital options in the region. The 10th World Islamic Economic Forum (WIEF) held in Dubai last year had a lively panel discussion on the role and future of crowdfunding to fill the VC void in Islamic finance. The discussion and increased interest in crowdfunding is a positive step and will help increase awareness of VC as an important tool for positive socio-economic development in the region.


Islamic PE and VC have an opportunity to substantially contribute to the economic growth in the region by supporting businesses of all sizes reach the next level. However, it will continue to be a challenge for the industry to differentiate itself from conventional PE.

However, there are encouraging signs for VC with the growth of crowd equity funding which is inherently compatible and mutually reinforcing with Islamic values of building and supporting local communities, encouraging risk and wealth sharing, promoting real economic activity, and equity ownership over debt. These goals should be near and dear to all investors and participants in Islamic PE and VC.