The State of the MENA Private Equity Market

The MENA region private equity sector is the subject of much discussion these days.  The Financial Times today published this article which makes mention of an increase in recent fundraising in MENA.  However, the article also states that large deals like those that were much more common in yesteryear are now fewer and far between.

What’s happened?  As with other regions in the world, many preferred private equity / venture capital asset classes in the MENA region (particularly the GCC) have taken a hit.  This can be illustrated just by looking at business news coming out of Dubai.  However, declining real estate prices in Dubai may not necessarily be the best metric for PE activity.

For one, not all private equity investments are or have to be in real estate.  There are many other emerging market sectors in the region that are worthy of investment.  These include clean energy, water desalination, transport infrastructure, and even areas such as education.  Even sectors like hospitality which have arguably reached saturation points in some parts of the GCC may still have notable potential in other less developed parts of the region (I remember trying to book a hotel for a weekend trip to Muscat in 2008 – hotels that would barely go for $70 a night in the Washington, DC area were approximately $200 a night in the Omani capital).

Second, not all private equity investments have to be or are in the GCC region.  Indeed, certain sectors in other jurisdictions such as Lebanon and Egypt appear to be experiencing significant growth, and this is not to mention increasing interest by GCC investors in emerging markets such as east Asia, Africa, and even some as far as Latin America.

Are there barriers to entry? Yes, both for startups seeking MENA/GCC venture capital and for GCC investors seeking to invest overseas.  Issues typical to joint ventures, project financings, and other private equity deals such as deal structuring, overseas dispute resolution, recourse, and risk exposure are not uncommon. Seeking VC funding from the GCC is not the same as doing so in northern California or Washington, DC.  The preferences of investors differ, the investment landscape can be vastly different – so parties should never discount the importance of seeking out expert advice.

The fact is that the GCC remains a small area with huge potential and an arguably tremendous amount of capital that can arguably not only satisfy its internal investment needs also much of those of many other emerging and established markets.

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