The coming two years present unparalleled opportunities for private equity in emerging markets, particularly those in the Middle East and Africa, a senior regional private equity executive told participants at the world's largest industry conference on Thursday. “Many countries in the region have governments that are simultaneously open to the private sector and possessed of over-stretched balance sheets and an under-developed private sector. Moreover, the global economic crisis and the tightening of regional credit it prompted has created a new market for corporate control as more and more distressed sellers are disposing of good assets at reasonable prices. All of these developments create new room for private equity players such as ourselves,” said Ahmed Heikal, chairman and founder of Citadel Capital. Citadel Capital, the leading private equity firm in the Middle East and Africa with investments worth more than $8.3 billion in 15 industries spanning 14 countries, is a lead sponsor of the International Finance Corporation's 12th Annual Private Equity Conference held in association with Emerging Markets Private Equity Association (EMPEA) in Washington D.C. on May 11-12. The annual event brings together leading private equity professionals from over 50 countries around the world to examine emerging market opportunities and identify which markets and sectors present the most compelling investment thesis. Heikal participated in panel that looked into specific issues that are likely to have an impact on the development of private equity in the coming year. “Regulatory reforms that came about as a result of the global financial crisis will create new opportunities for private equity players. Banks for example, will be forced to differentiate between their own balance sheets and risk-taking activities within banks. The result will be that pools of capital now within confines of banks will have to be sub-contracted to third-party asset managers - private equity in general, and emerging markets private equity in particular, stands ready to benefit from this development,” said Heikal. Emerging markets private equity has never been as heavily dependant on debt to turbo-charge returns as have PE firms in mature markets. As a result, regional players have remained on solid ground throughout the crisis. Some, including Citadel Capital, made progress on fundraising during the crisis while simultaneously ensuring all of their existing investments were on track. “The economies of the Middle East and Africa will continue to grow as strong sovereign fiscal positions based on historic and projected earnings continue to support the substantial economic diversification and infrastructure spending programs announced by many regional governments. We can also expect the outlook for commodity plays in MEA to continue to be favorable, whether we are discussing oil and mining or soft commodities. On this front, we can expect stable, if not increasing prices in the coming period,” said Heikal. The key, Heikal concluded, will be not just to unearth the right investments, but to tackle them each according to their own needs. Emerging markets will thus favor regional specialists and control investors with clearly defined investment theses who can deliver the substantial added value that national companies need to become platforms for regional growth.
