There's been plenty of carping recently about how private equity is going down the tubes. The doomsayers do have a point - look no further than Sam Zell's foolhardy takeover of the Tribune Co. in the US for evidence of how getting stuck with a bunch of leverage ain't fun. But I'm still unconvinced that the global unwinding will be disastrous for the Middle East's budding PE firms.
Why? As Mohamed Ramady points out in this column, leverage hasn't been as central an element in Gulf PE deals as it has been in the West. More importantly, though, I think a lot of PE firms in the Middle East ended up getting lucky in the fundraising cycle. They were able to raise a lot of money in the recent boom years, but they haven't yet spent it because, well, these things take time.
Put it this way: according to Zawya, funds in the region successfully raised $9.9bn between 2005 and 2007. Even in 2008, funds managed to raise another $3.6bn. (Before 2005, private equity activity in the region was pretty thin.) Some of this money has already been spent. Yet a lot of it certainly hasn't. That means regional PE funds have a nice cash cushion just when a lot of businesses are looking to sell at ridiculously meager prices.
Is this a Big Deal? Probably not; the volume of PE business in the Middle East is puny relative to that of the more established markets. Still, I'd hesitate to use the same criticisms leveled at PE broadly to the industry in the Middle East; we're different.