The Mena region’s private equity sector look set to face another challenging year following the slow fundraising that characterised the last 12 months.
Data from research firm Preqin shows that the amount of capital raised by Mena-focused funds dropped by 65% in 2018 – $406 million from eight funds compared to $1.168 billion from 10 funds in 2017. The 2018 figure is also a far cry from the $14.283 billion raised in 2015.
The number of deals (17) was the same in 2018 as in 2017 but was considerably less than in the previous three years.
Aggregate deal values more than doubled in 2018 to $743 million, up from $350 million in 2017. The largest deal of 2018 was the $267 million invested by Abu Dhabi-based Gulf Capital in the Saudi fintech Geidea. However the deal value was still some way short of the deal value in 2014 which exceeded $1.75 billion.
And any hope of a quick recovery is likely to be dashed due to rising interest rates, tough global macro-economic conditions and corporate concerns, according to analysts.
In addition, the industry is still struggling to overcome the fallout from the demise of Dubai-based Abraaj Capital, previously the region’s largest buy-out fund before a dispute with key investors over the spending of its $1 billion healthcare fund led to it seeking liquidation.
A report from rating agency Fitch in late November 2018 made similar points, suggesting that the Mena private equity industry had “lost the deal momentum” built up post-2008 and “appeared unlikely to regain that uptick in activity again anytime soon”.
Despite the pessimistic forecast for 2019, most analysts agree that there is a long-term future for the Mena region’s private equity funds due to the potential of the region’s fintech sector and the expected recovery of the two biggest economies in the region: Saudi Arabia and the UAE.
©2019 funds globla mena