The Gulf is probably "the only sunny region in the global landscape for private equity", the head of Gulf Capital said yesterday. "There are different options and the chance to time exits properly," said Karim el Solh, the company's chief executive. "We're telling our managers not to listen too much to what is happening outside and to focus on doing business here and we'll get our rewards down the line. It has switched from a seller's market to a buyer's market for private equity in this region."
One private equity deal has been signed in the past 48 hours and others are close to being signed. Gulf Capital, a private equity firm focusing on investments in the region, believes a lot of opportunities are available in the oil, healthcare and education sectors. The firm formed an alliance with Credit Suisse in the spring of this year and is going ahead with the launch of a US$500 million (Dh1.8 billion) fund that is already oversubscribed and expected to close by the end of this year.
Investcorp, a private equity firm based in Bahrain, announced yesterday it had acquired a 36 per cent stake in Redington Gulf, a fully owned unit of the Indian IT distributor, Redington India, for $98 million (Dh360m). "Our plan is to grow the company organically in the Middle East and North Africa region and Central Asia," said Azmat Taufique, Investcorp's managing director and co-head of the Gulf Growth Capital business. The deal will enable Redington Gulf to expand throughout the Middle East and Africa. "We may also look into acquisitions where it makes sense," he said.
Investcorp will finance the deal through its Gulf Opportunity Fund I. The fund has a capital of $1.1bn and is designated for investments in the Gulf, the Middle East and North Africa. "We're seriously looking into 50 to 60 companies in the region but now doing due diligence on a dozen," Mr Taufique said. "We expect to do 12 to 14 deals in the fund within an investment period of four years." The fund will target opportunities in the energy, construction, infrastructure and consumer-related sectors at a net return in the range of 20 per cent annually, he said.
However, Investcorp's chief operating officer, Gary Long, said on Monday that the investment firm's portfolio companies were under stress, that getting leverage for deals was difficult and that some investors were nervous. "Dealflow is down, leverage is a lot more difficult... and returns are under pressure," Mr Long said. "That's true for private equity, that's true for hedge funds, and that's true for real estate investing."
However, the situation is different in the Gulf. "This is a golden age for private equity in the Gulf." Kuwait's Global Investment House announced yesterday that it was looking to close six private equity deals before the end of the year despite challenging conditions amid global economic turmoil. "We're looking at two more investments to close by December and another four buyouts to finalise by end of November," said Amitava Ghosal, the assistant vice president for private equity funds at Global Investment House.
"Raising money is obviously more challenging now but with a track record and the trust of investor base, a lot can be done." Global Investment House manages close to US$10 billion worth of assets, out of which $3bn are mostly in private equity. The company has four private equity funds, two of which are fully invested. "The Global Investment House Opportunistic Fund II will be fully invested by the end of this year. We target minority stakes in non-oil sectors in the Middle East and North Africa region," Mr Ghosal said.
The company hopes to finalise four buyout deals by the end of November through its $615m Global Buyout Fund, Mr Ghosal said. "Close to $270m has been invested so far and by the end of November, 75 per cent of the fund will be invested," he added. The buyout deals will target one construction company and one interior design company in Dubai, a logistics firm in Kuwait and a contracting company in Saudi Arabia.
On Monday, the private equity firm Abraaj Capital, based in Dubai, said it had raised almost Dh11bn for its new buyout fund. "We see opportunities in all sectors across the region. It's the best time to be cautiously looking at transactions as valuation expectations become more realistic," said Mustafa Abdulwadood, the company's managing director. Abraaj Capital, which specialises in private equity buyouts in the Middle East, North Africa and South Asia, has struck several deals in the region and has now more than $5bn of assets under management.
shamdan@thenational.ae * with Dow Jones