Breaking several records, 2007 witnessed continuous growth in the private equity industry of the Middle East. The first billion dollar investment was completed in 2007 when Abraaj Capital took over Egypt Fertilizers Company for $1.4 billion. Abraaj Infrastructure & Growth Capital Fund was the first fund exceeding one billion; hence, setting the path for the entrance of mega funds into the region. In the second Private Equity and Venture Capital Annual Report for the Middle East report launched in Dubai International Financial Center by Gulf Venture Capital Association (GVCA), in collaboration with KPMG and Zawya early this week, it estimated that new amounts committed to private equity funds in the Middle East has more than doubled in 2007, from $2.7 billion in 2006 to $6.0 billion in 2007 (a 122 percent increase). This brings the total funds under management of private equity houses to be around $13.3 billion in more than 76 funds, it added. In 2006, the total investments were $1.8 billion in more than 50 investments, and in 2007 this number witnessed an increase to $3.5 billion in more than 62 investments. There was a number of exits recorded in 2007. Private equity houses sold 19 of their investments for a total amount of $1.6 billion, compared to 17 sales amounting to only $0.2 billion in 2006. With several funds selling successfully their investments, private equity industry is bolstering its reputation of being one of the best asset classes for investors. In terms of geographic distribution, Egypt was the leading recipient of private equity investments over the past decade with a market share of 37 percent as a result of few large investments in 2006 and 2007. UAE has been consistently a favorite destination by number of investments, and came second with 19% of total investments. Given its enormous economic weight, Saudi Arabia market share has risen quickly to 15 percent as it became a destination for investments. Jordan , and as a result of its open economy, came in forth place with 6 percent market share ahead of several larger Arab economies. The report has also surveyed companies backed by private equity funds which also witnessed outstanding growth. These companies have increased their sale by more than 92 percent, their exports by more than 95 percent and their profits by more than 92 percent. More importantly, private equity companies have increased their investment by 86 percent, their employment by 43 percent and their R&D spending by 32 percent, highlighting the role of private equity in sustainable economic development. Ashish Dave, head of Private Equity, Middle East and South Asia in KPMG, said: “If this report and successive annual reports, can assist in demonstrating to a global audience that there is real substance, structure and professionalism behind the stories of liquidity and petrodollars looking for a home, then this can only benefit the region's private equity houses and their investors.” Ihsan Jawad, board member in the GVCA board and CEO of Zawya, said: “This document reports another remarkable year for private equity in MENA. The billion dollar deal milestone was surpassed for the first time with the Egyptian Fertilizers Company deal. Capital raising for existing funds remained strong, but newcomers found it harder to raise money, which is a sign of maturity in the industry. Exits, once a mirage, are becoming more common with 19 reported in 2007, up from six in 2005.” Imad Ghandour, chairman of the Information & Statistics Committee in GVCA and executive director in Gulf Capital, said: “We expect this growth in the industry to continue into 2008, but the investment environment will be more challenging. Economic fundamentals remain strong in the Middle East, but all financial players will feel the heat of the global meltdown. Hopefully, our region will be the least affected.” __
