CFA QATAR SOCIETY MEETING
”OVERVIEW OF PRIVATE EQUITY IN THE MENA REGION”
Francesco Cottini Qatar & Abu Dhabi Investment Company
October, 2016 FUNDS RAISED & COMPLETED INVESTMENTS(*) (*) It includes venture capital deals ~ $1.5bn invested in 2015 with a median deal size of c. $15mn (with 84% of all transactions in 2015 below $25mn)
Source: MENA PE Association, 2015
2 INVESTMENT VALUE BY SECTOR IN 2015 Consumer goods, education and healthcare attracted almost 60% of investments by value due to MENA favorable demographic profile and government spending
Source: MENA PE Association, 2015
3 INVESTMENTS BY COUNTRY IN 2015 Investments by value are led by MENA largest markets with a growing middle class. Investments by volume are led by: UAE and KSA
Investments by Value Investments by Volume
Source: MENA PE Association, 2015
4 DIMENSIONS INFLUENCING INVESTMENT STRATEGY In MENA, the growth capital/minority stake model is the most common, due to the prevalence of family owned businesses, seeking to retain control
Source: Bain&Co. 2016
5 KEY STRENGTHS / OPPORTUNITIES
Favorable . Large, young population driving consumption demand Demographics
Market . 3rd in the world GDP growth as a regional block (4.5% CAGR ’15-’19) Growth . Most markets are highly fragmented, offering a range of opportunities for consolidation or scaling
Currency . Various currencies are pegged with the dollar: critical advantage Stability compared to other emerging markets
Government . Expected recovery in oil prices and need for governments to spend on Spending infrastructure result in attractive, demand-driven economies
Geographical . Gateway to Africa and Far-East Location
6 KEY CHALLENGES / RISKS
Market . Dominated by family groups, reluctant to divest. ~ 90% of all Structure commercial non-oil related activities is controlled by family firms
Asset Class . Absence of a lengthy track record can lead to reluctance to Immaturity acceptance private equity;
Governance . Highly interconnected business culture can lead to conflicts of Transparency interests Geopolitical . Arab spring, political turmoil Instability
Rapid Regulat. . i.e. increase of cost of fuel, introduction of VAT, etc. Changes
Exit . Illiquid public markets, strongly correlated to hydrocarbon prices and Opportunities largely owned by local Governments
7 KEY COMPETITIVE DIFFERENTIATORS The prevalence of growth capital transactions in MENA means that building a good relationship with the selling party is fundamental to successful transacting
Networks / Contacts
Ability to Close Quickly Brand / Reputation
Sector Specialism / Market Knowledge
8 PRIVATE EQUITY MARKET MAPPING IN MENA
Funds by geography focus, size and year of last fundraise
$+800m
$200m
Source: Credit Suisse: Private Equity Market Maps, Jan. 2015
9 LIST OF PE AND VC FIRMS IN MENA (*) (*) not exhaustive, it excludes real estate, infrastructure and sovereign funds Family-based (Amwal al Khaleej ), Government-sponsored (ADIC), Bank-based (EFG Hermes, TNI) and Independent firms (Delta Partners, Gulf Capital) Abu Dhabi Investment Company Compass Capital IdeaVelopers QInvest Abu Dhabi Investment House Concord International Investments Ikdam Gestion ReAya Holding Accelerator Technology Holdings Daman Investments IMENA Riyad Capital Al Mal Capital Delta Partners Intel Capital Sadara Ventures Al Mal Méditerranée Invest Dubai Silicon Oasis Capital Investcorp SAGES Capital Alkhabeer Capital Duet Group Limited Iris Capital Samena Capital Al Masah Capital Limited Eastgate Capital Group Ithmar Capital Sanabil Investments Alternative Capital Partners ECP Investments Itqan Capital Saned Partners Amen Invest EFG-Hermes Private Equity Jadwa Investment Saudi Technology Development and Amwal Al Khaleej Commercial Emerging Investment Partners KAMCO Investment Company Investment Company Investment Company EuroMena FMC Limited KAUST Innovation fund Sawari Ventures Anfaal Capital Company Evolvence Capital Kuwait Finance and Investment Co Sherpa Finance Club Arzan Capital Fajr Capital Kuwait Financial Centre SHUAA Capital Ascent Group Fenox Venture Capital Leap Ventures Siraj Fund Management Company ATLAMED Corporate Investment Fidelium Finance Levant Capital Limited Sphinx Private Equity Management Attijari Invest FINACorp Malaz Capital Standard Chartered Private Equity Audacia Capital Firogest Maxula Gestion STC Ventures Auvest Partners Limited First Equity Partners MBC Ventures Swicorp Azur Partners Foursan Group Mediterrania Capital Partners The Abraaj Group Bank Alkhair Genero Capital MENA Infrastructure The National Investor BECO Capital GFH Capital Mena Venture Investments TIMAR Ventures Beltone Private Equity Global Capital Management Limited Middle East Venture Partners Tuninvest Finance Group Berytech Global MENA Financial Assets MITC Capital Tunisie Valeurs Brookstone Partners Morocco GroFin Advisory Mobily Ventures TVM Capital Healthcare Partners Ltd. Cairo Financial Holding Gulf Capital Pvt. JSC Mulverhill Associates United Gulf Financial Services N.A. CAPSA CAPITAL PARTNERS Havenvest Private Equity Middle East NBK Capital Partners Limited Upline Investments CDG Capital HBG Holdings Nile Capital Venture Capital Bank Cedar Bridge Hummingbird Ventures Qalaa Holding WAHA Capital CI Capital Holding Company S.A.E. ICT Ventures Limited Qatar First Bank Wamda Capital
10 LARGEST SOVEREIGN WEALTH FUNDS IN REGION
Country Fund Assets (US$B) UAE Abu Dhabi Investment Authority 773 Saudi Arabia SAMA Foreign Holdings 757 Kuwait Kuwait Investment Authority 548 Qatar Qatar Investment Authority 256 UAE Abu Dhabi Investment Council 90 Algeria Revenue Regulation Fund 77 UAE Investment Corporation of Dubai 70 UAE International Petroleum Investment Company 68 Libya Libyan Investment Authority 66 Iran National Development Fund of Iran 62 UAE Mubadala Development Company 61 Iraq Development Fund for Iraq 18 UAE Emirates Investment Authority 15 Oman State General Reserve Fund 13 Bahrain Mumtalakat Holding Company 11 Oman Oman Investment Fund 6 Saudi Arabia Public Investment Fund 5 Source: Sovereign Wealth Fund Institute (SWFI), UAE RAK Investment Authority 1 Accessed February 2015
11 APPENDIX
12 MENA SECTORS PERFORMANCE In the past 8 years the MENA index generated a negative performance, due to the financial and energy crises. The Consumer Goods sector registered +3%
MENA Index Consumer Goods Materials Industrials Financial Services Telecom Energy
CAGR Returns to date -3% +3% -5% -6% -2% -2% -8% Standardized scale (%) scale Standardized
Source: Bloomberg HERMMENA Index - Total returns
13 returns for the 5 The public equity market that has historically generatedthe highest average INDICESTOTALGCC COMPARISON RETURN Source: Bloomberg Bloomberg Source: Indices total returns – standardized scale 07/04 11/04 03/05 Qatar 07/05 Bahrain Oman Kuwait Qatar UAE (Abu Dhabi) UAE (Dubai) Saudi -
Total Total returns 11/05 Stock Exchange 03/06 Bahrain 07/06
11/06 - year private equity cycle within the period 2004 03/07 Saudi Arabia Saudi 07/07 11/07 # of# companies representing 25% of total 03/08 07/08
11/08 Kuwait 03/09 market cap 07/09 1 2 2 2 2 2 3
11/09 Adu Dhabi 03/10 07/10 11/10
03/11 Dubai 07/11 11/11 5 - Oman 03/12 yrs moving average of total returns for the 07/12 11/12
03/13 period 2009 07/13 - - - - - 3.7% 0.1% 7.6% 4.2% 5.7% 4.3% 1.9% 11/13 -
03/14 2015 -
07/14 2015 is Qatar 11/14 03/15 07/15 11/15 03/16 14 MENA IS FORECAST TO BE 3RD-FASTEST GROWING REGION IN THE WORLD GDP growth, constant prices (%)
Source: IMF, October 2014 World Economic Outlook Source: Bloomberg - Total returns
15