MENA Private Equity and Venture Capital Report 2014 2 MENA Private Equity and Venture Capital Report 3 MENA Private Equity and Venture Capital Report Foreword With Gratitude

Dear friends and colleagues, and networks, and who benefit from the The MENA Private Equity Association Media Task Force experience of investing through economic I am honoured to introduce the 9th edition We are grateful for the public relations and media cycles and periods of political volatility. Extends its sincere appreciation to Zawya for sharing campaign support from the following: of the “Private Equity & Venture Capital primary data and industry and to our knowledge in the Middle East Report”, a publication Bringing such seasoned professionals partners Deloitte for developing the report analysis. Nahed Ashour, Senior Manager Arabic Content and that has become a leading barometer of together; the MENA Private Equity Media, Capital MSL our industry and, indeed, of the region’s Association gives the industry a strong and economic development. clear collective voice, and acts as a link to similar associations around the world. In the decade since the report began, private Deloitte Sponsors equity has established a strong foothold, Compiling this report is an important part of Declan Hayes, Managing Director, Deloitte Corporate weathered a global economic crisis, and the association’s work, serving to promote Finance Limited Without the support of the following generous emerged stronger. It is clear that although greater transparency in the industry and to sponsors, this report would not have been global perceptions may be clouded by news enhance knowledge of the impact of private Sam Surrey, Director, Deloitte Corporate Finance possible. coverage of geopolitical instability, investors investment on the economy. In this way, the Limited with deep knowledge of the region are association complements the work carried as positive as ever about the tremendous out every day by fund managers across Zawya opportunity on offer in countries that have the region as they gain the interest and Ali Arab, Product Manager, Zawya Financial Solutions, developed rapidly in so many aspects. confidence of international investors. Thomson Reuters This report shows that in 2014, investment I would like to express great appreciation to Josiane Assaad, Content Manager, Zawya Investment levels are at the highest level since the global Lina El Zein, Director of the MENA Private Monitors, Thomson Reuters HealtHcare Partners financial crisis. The average deal size is Equity Association, and her support team also on the rise, driven in part by a number and advisers, who support our cause with Youmna Akiki, Research Associate, Zawya Investment of large consortium transactions in the six such enthusiasm and dedication. Last but not Monitors, Thomson Reuters countries of the Gulf Cooperation Council. least, we would very much like to thank the And we are seeing more international private sponsors of the association and of this report. Steering Committee equity participation. Sincerely Yours, We also thank the association’s steering committee General partners will be encouraged by members for their contributions towards the fundraising increasing to the highest level Dr. Helmut M. Schuehsler development of this report. since 2008, with the amount in 2014 double Chairman & CEO, TVM Capital Healthcare Dr. Helmut Schuehsler, Chairman & CEO TVM Capital that of the previous year. This has been aided Healthcare Partners Partners by an increased volume of successful exits. Haythem Macki – Founder & Managing Partner, With the consumer story only just Growthgate Capital getting underway – driven by youthful Huda Al-Lawati, Managing Director, The Abraaj Group demographics, rising incomes, and relative under-penetration of many goods and Imad Ghandour, Managing Director, CedarBridge services -- the MENA private equity industry is Partners offering investors exposure and growth that Samer Sarraf, UAE Country Head, Amwal AlKhaleej is often purer than that found in public equity markets. The industry is well served by a roster of fund managers with strong regional expertise 4 MENA Private Equity and Venture Capital Report 5 MENA Private Equity and Venture Capital Report

Sponsor Profile HealtHcare Partners Sponsor Profile

TVM Capital Healthcare Partners environmental sustainability. TVM Capital Healthcare BECO Capital for the Corporate Venture Capital arm of a FTSE 500 advocates ethical behaviour in all of its activities as company in London, which invested in 4 companies TVM Capital Healthcare Partners was established in well as a transparent and open consultation processes BECO Capital is a Venture Capital firm that provides and exited 6 over 24 months. Later, he helped 2009 as part of TVM Capital Group, an affiliation of with stakeholders. The close engagement with TVM early stage growth capital and hands-on operational establish and manage the first ever seed capital globally acting venture capital and private equity Capital Healthcare’s portfolio companies on social, support for technology companies in the MENA fund in the MENA region out of Dubai, as part of a firms with an operating track record of 30 years, environmental and governance (ESG) aspects, fosters region with a focus on the GCC. Founded in 2012, Government-led initiative. and has since then been led by Chairman & CEO, a deep awareness and understanding of ESG issues BECO Capital is led by a team that enjoys a solid Dr. Helmut M. Schuehsler. TVM Capital Group has that protects and enhances the value of investments, and diverse track record across the venture capital, Alvaro was previously with Gulf Capital, joining at financed more than 130 healthcare and life science ensures responsibility towards environment and technology, entrepreneurial and financial sectors. The inception in 2006, responsible for its TMT investments companies and has documented its success as a society, and attracts and retains a motivated and Firm is a hands-on partner that assists its portfolio conducting all investment activities with a prime growth capital investor through 45 initial public loyal workforce which shares the firm’s pursuit of companies to grow organically and expand to new focus on post-acquisition. Alvaro also has extensive offerings from its portfolio. The firm is focusing on excellence. markets across the GCC, acquire key talent, implement TMT consulting experience having worked for various making highly specialized growth capital and small operational improvements, adopt corporate firms such as Booz & Co and Diamond Cluster/Oliver buyout investments in healthcare companies in the governance practices and raise growth funds. BECO Wyman across the world.” Capital also offers follow-on funding to its portfolio Middle East and North Africa (MENA) region and India that are or target to become leaders in their Contact Information companies and helps line-up large regional investors regional markets. The firm has assembled a strong and global Venture Capital firms for larger follow-on Contact Information: team of investment professionals who are supported TVM Capital Healthcare Partners Ltd. fundraising rounds. by a group of healthcare operators as executives-in- DIFC Gate Village, Building 4 BECO Capital invests in companies that ride the BECO Capital residence in its accelerator company, TVM Operations technology revolution in our region; solving local Office #1903, Grosvenor Business Tower Group, and TVM Healthcare Advisors, which provides PO Box 113355, Dubai, UAE problems for businesses and consumers, building healthcare focused research and advisory services. T +971 (4) 401 9568 marketplaces that bring consumers and businesses Al Barsha-TECOM Collectively, this team has developed an ability to together and creating efficiencies that never existed P.O.Box 333357 conceptualize and develop business opportunities www.tvm-capital.ae or www.tvm-capital.com before. We strive to identify and support the leading that provide investors with completely proprietary entrepreneurs that will build the break-out companies Dubai, UAE deal flow and investment opportunities. TVM Capital in the MENA digital space. To this end, we have Healthcare Partners has broken new ground with screened over 700 opportunities in the MENA Tel: +971 4 368 7811 four portfolio investments to date in specialized region and invested in 8 portfolio companies, such www.becocapital.com

Thomson Reuters Deloitte & Touche (M.E.) Thomson Reuters is the world’s leading source Deloitte & Touche (M.E.) is a member firm of Deloitte of intelligent information for businesses and Touche Tohmatsu Limited (DTTL) and is the first Arab Important Notice Deloitte Introductory Message professionals. We combine industry expertise with professional services firm established in the Middle innovative technology to deliver critical information to East region with uninterrupted presence since 1926. leading decision makers in the financial and risk, legal, Deloitte is among the region’s leading professional 01 02 tax and accounting, intellectual property and science services firms, providing audit, tax, consulting, and and media markets, powered by the world’s most financial advisory services through 26 offices in 15 trusted news organization. countries with over 3,000 partners, directors and staff, with a globally connected network of member firms in 1.1 Basis Of Preparation The Financial & Risk business division provides more than 150 countries. 1.2 Definitions and Assumptions Venture Capital In The MENA Region solutions to the global financial community - 1.3 Data Filtering delivering critical news, information and analytics, Deloitte Corporate Finance Limited was established enabling transactions and connecting communities jointly in September 2008 by Deloitte & Touche 04 of trading, investing, financial and corporate Middle East and the UK Deloitte LLP practice in order professionals. to offer the highest quality financial advisory services Personal and business Integrity in the Gulf. We help our customers generate superior returns, improve risk and compliance management, increase The business is headquartered in Dubai with over 200 Survey access to liquidity and create efficient, reliable professionals throughout the GCC and is now one 03 infrastructures in increasingly global, electronic and of the fastest growing financial advisory businesses multi-asset class markets, through our market-leading anywhere in the world for Deloitte, the world’s largest Thomson Reuters Eikon, Thomson Reuters Elektron professional services firm. 3.1 Overview 06 and Thomson Reuters Accelus. Deloitte Corporate Finance Limited services cover 3.2 Investments Thomson Reuters is the largest financial markets corporate finance advisory, transaction services, 3.3 Divestments 6.1 Survey of General Partners (GP’s) in The MENA Region vendor in the world, with headquarters in New valuation, business modelling, forensic, reorganisation 3.4 Fundraising York and major operations in London, Paris, Dubai, services, real estate advisory and capital projects, with 6.2 Survey Results Bangalore, Hong Kong, Eagan and has a strong clients ranging from governments and public sector regional presence with 18 offices around the Middle businesses to private companies, family businesses East and employs over 650 people in the region. and offices, financial institutions and international Thought leadership corporations operating in the Middle East. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, go Appendix to www.mena.thomsonreuters.com 05

5.1 Look for a return on gender equity, by Hoda Abou-Jamra - 07 Founding Partner, TVM Capital Healthcare Partners 5.2 The 2nd half of the chessboard, by Alvaro Abella- Managing Director, BECO Capital 7.1 About The MENA Private Equity Association 5.3 Opportunities and challenges for private equity in Saudi 7.2 Members Directory Arabia, by Alkhabeer Capital 7.3 Private Equity And Venture Capital Firms In MENA 5.4 Startup pains and the funding gap in Saudi Arabia, by Khalid Suleimani- Head of Venture Capital at Alkhabeer Capital 8 MENA Private Equity and Venture Capital Report 01 9 MENA Private Equity and Venture Capital Report 01 Important Notice Important Notice

1.1 Basis of the Annual Report The fund raising totals are the amounts closed/ Currency: Where funds data has been provided in a committed for fund raising funds, closed funds, currency other than USD, exchange rates applied are Preparation investing funds, fully vested funds, and liquidated from the last day of the month in which each close is This report has been prepared based on data sourced funds. reported, e.g. first close reported in € on 15 April 2014 from the Thomson Reuters - Zawya Private Equity would be calculated using the exchange rate for 30 Exits are defined to include partial exits, although April 2014, taken from publicly available sources. Monitor and primary research initiated by Deloitte. simple dilutions have not been included. Historical data was updated from that used in the Funds of funds or Secondaries are excluded. 2013 annual report to reflect increased disclosure of 1.2 Definitions and Assumptions Region: Statistics are based on the “market” approach information in the market. and funds are categorized based on the intended For analytical purposes, we have considered the The information contained herein is of a general destination for investments (as defined in a fund’s following types of funds, as defined by Zawya’s Private announced mandate) as opposed to where the private nature and is not intended to address the Equity Monitor: circumstances of any particular individual or entity. equity firm is located. With regard to multi-region Although we endeavor to provide accurate and timely Announced: Official launch of funds which are yet funds, we have included these to the extent that there information, there can be no guarantee that such to commence fund raising. is a focus on the MENA region. EMPEA methodology information is or will continue to be accurate. No one includes only those multi-region funds whose primary should act on such information without appropriate Rumored: Funds expected to announce their intention is to invest in emerging markets. However, professional advice after a thorough examination of intention to commence fund raising. the source data does not provide visibility on primary geographic intention. the particular situation. Fund raising: Funds that have been announced and In analyzing and determining the parameters of are in the process of raising capital. Funds established with a specific mandate to invest in real estate are excluded from the fundraising, available data, it has been necessary to apply certain Investing: Funds that have closed and are actively investment and exit totals. The remaining real estate criteria, the most significant of which are as follows: seeking and/or making investments. investments relate to funds with mixed investment Fully invested: Funds that have invested all capital mandates. raised. Some of the investments may have divested Private equity is defined to include houses that Conventional infrastructure funds, or funds investing in this stage, but not all. have a General Partner/Limited Partner structure, directly in greenfield infrastructure projects (e.g. investment companies and quasi-governmental Liquidation: Funds that have divested all bridges, roads, etc.), are excluded from fundraising entities that are run by, and operate in the same investments and have fulfilled all obligations to totals. However, funds that make private equity way as, a private equity house. shareholders. investments (determined based on target returns) in companies operating in the infrastructure sector are Venture capital for the purpose of this report is included. defined as a fund specifically dedicated to venture 1.3 Data Filtering capital investments. This includes funds by venture EMPEA does not track or report other alternative asset capital firms, and venture funds under private The primary data sourced from Thomson Reuters – classes, including hedge funds, real estate funds, and equity firms. Zawya has been filtered according to the definitions conventional infrastructure funds. In our analysis we used in the Emerging Markets Private Equity have excluded data from investment-type companies, Funds managed from MENA, but whose focus is to Association (EMPEA) research methodology. In real estate firms, and sovereign wealth funds. invest solely outside the region, are excluded from particular, we have used the following definitions: the fundraising and investment totals. Fund Size: In the case of funds yet to make a first close, MENA includes Algeria, Bahrain, Egypt, Iraq, or where no close information is available, fund size is Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, equivalent to the target amount, and is noted as such. Palestine, Qatar, Saudi Arabia, Sudan, Syria, For funds achieving at least one official close, fund Tunisia, the United Arab Emirates, and Yemen. size is reported as the capital raised to date, while for Investment size represents the total investment funds that have made a final close, the fund size is the (both the debt and equity portions). However, total capital raised. All amounts are reported in USD fund size only considers equity invested, as we millions. Rumored funds are excluded. have no visibility on debt exposure by funds. 10 MENA Private Equity and Venture Capital Report 02 11 MENA Private Equity and Venture Capital Report 03 Deloitte Introductory Private Equity In The Message MENA Region

Deloitte is delighted to be partnering with the caution among some GPs and LPs. Almost a third of 3.1 Overview million to USD 1,229 million and the number of fund MENA Private Equity Association in its annual surveyed managers expect there to be a deterioration closings increased from 10 to 12. This reflects larger report on the regional private equity and venture in economic conditions over the coming year, Funds raised and investments completed funds being raised for those participants who are capital industry. We have collaborated on an impacting their outlook in respect of both investment 1,800 120 able to do so while it continues to be demanding to 1,600 1,547 analysis of performance (including investments, activity and fund raising. 101 100 raise funds for the region for GPs without a strong 1,400 91 93 divestments and fund raising activities in 2014) 1,224 1,229 track record in what remains a relatively embryonic 1,177 1,154 However, the longer term underlying fundamentals 1,200 80 1,057 and in surveying fund managers to gauge their 76 72 en ts industry. The trend of raising funds on a deal by deal 67 66 t m

67 917 s of the region remain strong with the demographic m 1,000

863 e D

outlook for the industry going forward in a 60 v basis continues to grow in popularity as a number of S n U 744 I profile, relative economic stability, increasingly 800 726 58 710 f 51 48 o

continuation of our regular Deloitte Private Equity . participants have found this to be a practical solution

46 o confidence survey. developed entrepreneurial outlook and underlying 600 510 40 N aligned to the preference of certain investors in the liquidity all supporting the view that the PE and VC 400 20 region. The data is not available to include these type 2014 was a significant year for the industry as industries are poised to continue developing positively 200 of fund raisings in our analysis. - - investment levels by value and fund raisings reached across the region. 2009 2010 2011 2012 2013 2014

a new high since the end of the last cycle in 2008. In Funds raised Investment value addition, investment and divestment volumes were Total number of investments Number of investments with known value 3.2 Investments both above 2013 levels. Investment values at USD We would like to thank Thomson Reuters Zawya, the Source: Thomson Reuters - Zawy a and Deloitte 1.5 billion were more than double those achieved in Investment information is necessarily not fully MENA Private Equity Association and the members of comprehensive as it is estimated that up to 30% of 2013. On a macro level there was a sense of returning the annual report committee for their assistance in the • 2014 was a positive year for the private equity and confidence and increased opportunities as the region venture capital industry in the MENA region. Fund PE and VC transactions in the MENA region are not development of this report. Their contribution of both announced, and not all announced transactions continued to emerge from the impact of the Arab data and insight has been invaluable. raising levels, investments values and volumes, and Spring. divestment volumes all increased over 2013 levels. include details regarding the size of the investment. Known investment volumes increased from 66 in 2013 As in prior years, there is a lack of visibility over the The year was characterised by some of the largest to 72 in 2014, while values reached the highest level funding structures used by fund managers to effect PE deals seen in the region. Fund managers had since 2008 and were significantly greater than in 2013, transactions and therefore investment values reflect demonstrable success in assembling and working total transaction size rather than equity investment. Declan Hayes as the year saw a number of major USD 100m plus with consortium partners, including international PE sized transactions. investors, to close major transactions. Managing Director Investment value and volume by year • As a result, the average deal size increased to a post Activity ranges widely across the region. While the Deloitte Corporate Finance Limited 2008 high of USD 32 million from USD 15 million in 1,800 120 1,547 UAE and KSA were the largest markets for private 2013, also driven by a continued recovery in market 1,600 100 s equity investment, investment values in Egypt 1,400 confidence. The year saw some significant consortium en t m 1,177 1,154 t continued to increase and fund managers estimate 1,200 80 s Sam Surrey transactions and attracted increased investment from e v n i

that Egypt will be one of the three most active markets m 1,000 917 f

international private equity investors, fuelling the D o

S 60 . U in the region over the next 12 months. Director 800 710 o

growth in activity levels. N 600 510 40 As noted, fund raisings for the year at USD 1.2 billion Deloitte Corporate Finance Limited • The UAE and Saudi Arabia continued to be the 400 were at the highest level since 2008. However, the leading destinations for investment, reflecting the 20 nature of fund raisings suggested that while those 200 geopolitical stability, healthy GDP growth and - - participants able to do so, are raising larger funds, scale of opportunities in the two countries. Market 2009 2010 2011 2012 2013 2014 the traditional fund raising approach is proving practitioners have also affirmed that the market Total investment value Total number of investments challenging for many and alternative structures, such Number of investments with size value maintained and increased its appetite for Egypt as Source: Thomson Reuters - Zawy a and Deloitte as deal by deal fund raising, are becoming increasingly the value of investments in the country more than prevalent. Over half of managers surveyed believe that doubled. fund raising will become more difficult over the next 12 months. • Exits increased from 16 in 2013 to 20 in 2014. While • 72 disclosed investments were made in 2014, an higher exit levels may have been anticipated given the increase of 6 over 2013. However, investment volumes While the medium term outlook for the industry increasingly positive market conditions, the trend is, is positive there is no doubt that the impact of remain below other years post the global financial however, upwards as GPs seek to divest both pre and crisis, as the challenge to effectively deploy capital geopolitical instability and a reduction in short term increasingly post 2008 investments. economic confidence resulting from the shock to oil in the region continues. While investor sentiment prices has more recently led to increased short term • Fund raising levels also increased from USD 744 improved in the year, finding suitable investment 12 MENA Private Equity and Venture Capital Report 03 13 MENA Private Equity and Venture Capital Report 03 Private Equity In The Private Equity In The MENA Region MENA Region

opportunities and competing with other asset classes Defensive and consumer driven sectors • Overall, the primary areas of investment remain Investment volume by sector in 2013 remain key priorities for fund managers. continue to dominate investment focus broadly unchanged with the industry remaining Education,1% largely shy of the more cyclical sectors such as real Other,3% • The value of disclosed investments increased by Telecoms,3% estate and construction. Larger deals in the education Manuf acturing, 3% 118% to USD 1.5 billion as the trend towards larger Investment value by sector in 2014 and services sectors were a significant feature in Transport,5% deals was a pronounced factor in deal activity in IT,30% IT,1% the year and education assets, in particular, have Media,6% 2014. Notable transactions included Fajr Capital, Retail,2% Other,3% consistently been identified as being attractive to Mumtalakat and Blackstone joining forces to invest Healthcare,4% PE investors. The demographic profile in the Middle Leisure,6% in GEMS Education and a consortium including Fajr F&B,8% East has fuelled this continued interest in the sector, Capital investing in National Petroleum Services. as a growing expatriate population, coupled with F&B,8% • The were 13 transactions in the MENA region with Serv ices and increasing domestic and expatriate wealth, have Manuf acturing,11% education,44% O&G,17% an investment value greater than USD 25 million, a helped to stimulate demand for private education Consumer goods,9 % marked increase over the six identified in 2013 and services. Healthcare,9% Investment value by sector in 2014 - investments under USD 100m this has also led to average transaction sizes increasing Source: Thomson Reuters - Zawya and Deloitte Other,6% to USD 32 million in 2014 from USD 15 million in the IT,4% • Information technology businesses saw the largest prior year. Significantly, the average value of private Oil and Gas,27% F&B,4% number of transactions as VC investors continued to equity investments in the year more than doubled Manuf acturing,30% target the sector (explaining the relatively low average to USD 70 million, albeit this is partly the result of a Retail,5% Source: ThomsonReuters - Zawy a and Deloitte investment value). limited number of larger transactions. Healthcare,10% • Investments in the manufacturing sector increased • While the availability of major assets inevitably significantly over 2013 as the sector has become more remains somewhat limited, 2014 was an important Investment value by sector in 2013 attractive post the downturn. year for continuing to demonstrate the range and scale of transactions that can be undertaken by fund Telecom,2% Oil and Gas,24% • We expect no major change in the short to medium Other, 3% Serv ices and managers in the region. Healthcare, 3% education,16% term sectors of choice for the private equity industry Serv ices and with the exception of greater caution regarding These larger deals within MENA reflected broadly education,8% oil and gas related investments given the marked favourable underlying economic conditions, Source: Thomson Reuters - Zawya and Deloitte decline in oil prices since the last quarter of 2014. • Given the impact on investment by sector of the positive market sentiment and the development of Oil and Gas,10% Fund managers have expressed the view that, larger USD 100 million plus transactions, we have also the industry as it continues to demonstrate it can unsurprisingly, the oil and gas sector is likely to see reviewed transaction values for those investments successfully execute these larger, complex multi restrained levels of investment in the short term given under USD 100 million. In aggregate the three major party transactions. The trend has continued into F&B,60% the decline in oil prices and resultant uncertainty sectors for investment remain manufacturing, oil 2015 with the Abraaj Group and TPG announcing Leisure,14% regarding investments in this space. their investment in leading KSA restaurant group, and gas, and services and education, demonstrating Kudu and Standard Chartered Private Equity a relatively consistent pattern of investments across leading a USD 175 million consortium investment a range of values. As expected, this emphasises the Source: ThomsonReuters - Zawy a and Deloitte The UAE and KSA attracted the highest in FINE, a Jordanian headquartered major stability of sector focus for fund managers in the levels of investment in 2014 integrated tissue manufacturer. Larger businesses region. Investment value by region in 2014 seeking funding or shareholders wishing to • In FY14, the greatest investment values were in oil Investment volume by sector in 2014 monetise part of their holding appear increasingly and gas (oil field services) and demographic driven Other MENA, 1 % Other,15% Lebanon,1% willing to consider private equity as an asset class sectors such as education, services and food and Outside MENA, 4 % IT,24% Morocco,1% to achieve this. beverage. Retail, healthcare and consumer goods Tunisia,2% Consumer goods, 4 % were also core focus areas for GPs as defensive and Jordan, 3 % Egypt,6% Such transactions have attracted increased investment consumer driven sectors continue to dominate Media,4% activity from international fund managers. In addition investment focus. Investment values in food and Turkey,6% to the above, Warburg Pincus agreed with dnata O&G,6% beverage in 2013 were particularly high as the result UAE ,55% to acquire a majority stake in Mercator, a provider Serv ices and of the Abraaj Group’s major investment in Fan Milk in Retail,4% education,21% of software and technology-enabled outsourcing West Africa. solutions to the aviation industry. Healthcare,6% KSA,21% Manuf acturing,7% F&B,10% Source: Thomson Reuters - Zawya and Deloitte Source: Thomson Reuters - Zawya and Deloitte 14 MENA Private Equity and Venture Capital Report 03 15 MENA Private Equity and Venture Capital Report 03 Private Equity In The Private Equity In The MENA Region MENA Region

Investment volume by region in 2014 3.3 Divestments • As with previous periods the data set does not reflect as deal by deal arrangements, increasingly being all divestments as a number of exits are either not explored and used as a substitute for the traditional Others,7% announced or when disclosed do not include deal blind pool structure. UAE ,21% Divestment volumes increased in 2014 values. Other MENA,8% Cumulative funds under management since 2000 while values reduced Turkey,6% 30,000 Number of divestments and exit value 3.4 Funds 25,000

Tunisia,7% m D

Jordan,14% 2,000 40 S 20,000 1,804 U 35 Fund raising increased to the highest 15,000 Morocco,7% 1,500 30 2008 2009 2010 2011 2012 2013 2014 25 1,180 1,021 level since 2008 Major funds raised in 2014 1,000 20 Source: Thomson Reuters - Zawy a Egypt,8% Lebanon,13% Investment Announcement Funds raised in 15 Close Funds raised Fund name Fund manager focus year FY14 ($m) 389 10 KSA,10% 500 1,400 25 GC Equity Partners Fund III Gulf Capital Grow th Capital 2013 75 0 Final close 156 117 5 NBK Capital Equity Partners Fund II NBK Capital Grow th Capital 2013 11 5 Final close EuroMena III EuroMena FMC Limited Balanced Fund 2012 10 0 First close Source: Thomson Reuters - Zawya and Deloitte - - The IMPACT Fund Middle East Venture Partners Venture Capital 2013 6 0 Second close 2009 2010 2011 2012 2013 2014 1,200 21 The Saudi SME Fund Malaz Group Balanced Fund 2013 5 3 Second close • The UAE and KSA attracted over 75% of MENA Total value of divestments (USDm) 20 20

Number of divestments 1,000 17 s Source: Thomson Reuters - Zawya investment activity by value in 2014 as private equity e s

Number of divestments with exit value o l c

fund managers continue to regard these as the most 15 • Cumulative funds under management increased to f Source: Thomson Reuters -Zawya and Deloitte m 800 o D 12

attractive regional markets, reflecting their scale and S USD 25.5 billion in 2014.

U 10 stability and increased availability of larger target 600 1,224 1,229 be r • Disclosed divestment volumes increased from 10 m 1,057 u • In 2014 five funds disclosed closes in excess of USD assets. The two countries accounted for a lower 16 to 20 in 2014 as GPs maintained their focus on 10 N 400 863 50 million compared to three in 2013. Three funds proportion of transaction volumes at 31%, as larger exiting pre-global financial crisis investments and 726 744 5 raised in excess of USD 100 million, consistent with deals were concentrated in these territories. increasingly realized value from more recent vintages 200 2013. – investments post 2008 comprised 15 of the exits • While the volume of transactions in Egypt reduced - - in the year. The impact of initial entry prices coupled FY09 FY10 FY11 FY12 FY13 FY14 in 2014 the value of investments doubled over those • The largest fund raised was Gulf Capital’s USD 750 with the global financial crisis appears to continue to Funds raised (USDm) Number of closes seen in 2013. Fund managers remain positive towards million GC Equity Partners Fund III, a control oriented affect the ability of fund managers to fully exit their the jurisdiction as the demographics of the largest Source: Thomson Reuters - Zawy a growth buy out fund. pre 2008 legacy portfolios. country in the MENA region with a growing middle • 2014 witnessed a significant increase in fund raising • The average time taken to raise funds continued to class and movement towards increased political • High profile capital market transactions included activity by value as total funds raised increased in FY14 be in excess of 12 months, with only one of the funds stability are key factors in attracting private equity Gulf Capital’s listing of Gulf Marine Services on the to USD 1,229 million, compared to USD 744 million in to successfully close in 2014 being announced in the investment. London Stock Exchange. However, fund managers FY13. This represents the highest level of funds raised year. continue to plan primarily for regional IPOs (as a by value in any year since 2008. The average close size • Both private equity and venture capital investors possible alternative to exits through the sale of also increased to USD 103 million. were active in the country in 2014, with private equity portfolio investments) as there are a limited number Growth capital funds remain the firms concentrating investments across the F&B, of assets held by private equity funds in MENA that • There was a marginal increase in the number of manufacturing, oil and gas and healthcare sectors. largest asset class would attract sufficient coverage for an international closes in the year (three funds closed twice in the year) Investments by venture capital firms favoured the listing. but the underlying trend appears to be larger funds Funds raised by type information technology and related sectors. raised by those able to continue to attract investors to 1,400 • Divestments are expected to remain a focus for the the blind pool concept. 1,200 • The level of transaction volumes across Lebanon, PE industry over the next 12 months, given the hold 1,000 Jordan, Morocco and Tunisia largely reflect the levels • Fund raising in the region continues to be m 800

periods for a number of assets. We estimate that D of venture capital activity in these countries and is challenging for many market participants, In part this S approaching 30% of MENA PE and VC investments U 600 consistent with the trend seen in 2013. have been held since 2008 or earlier, based on fund is due to the limited number of GPs with a confirmed 400 manager disclosures. track record. This reflects the relative youth of private 200 equity as an asset class in MENA. In addition, concerns - 2009 2010 2011 2012 2013 2014 • Assuming no major deterioration in market over geopolitical instability may prove a hindrance to Growth Capital Venture Capital Balanced Fund Buyout Other conditions, the positive exit trend is expected to fund raising. continue. Source: Thomson Reuters - Zawy a • These factors have led to alternative structures, such 16 MENA Private Equity and Venture Capital Report 04 17 MENA Private Equity and Venture Capital Report 04 Venture Capital In The Venture Capital In The MENA Region MENA Region

• Growth capital continues to be the primary focus of • The demographics of the region, with a young and • Based on available data, venture capital investment fund managers, although it is important to recognise growing middle class have supported a developing activity in 2014 was led by Lebanon, consistent VC investment volumes by sector 2011 -2013 that a number of funds classified as growth capital will culture of entrepreneurship, particularly in the with the trend seen in 2011-2013. The country is consider investments where there is a buyout element. technology sector with the region notable for its high characterised by small and medium size companies, Other, 19% Note that the GC Equity Partners Fund III is classified rates of technology adoption. While the impact of and as such, has proved attractive to the VC industry as growth capital in this analysis. the global financial crisis and the Arab Spring have in the region. Support from the Lebanese Central presented substantial challenges to VC investors, it Bank has further stimulated interest in investing in Consumer goods, 7% • The primacy of growth capital can be seen as a is encouraging that the industry has weathered the start up companies and SMEs. IT, 49% result of the tendency for PE firms in the region to storm to emerge into a new phase of development. focus their strategies on investing in businesses with • The 2014 launch of Middle East Venture Partners’ Media, 6% the primary aim of deriving value from growth in • Underpinning this positivity is the level of VC IMPACT Fund was an example of this, as the fund Manuf acturing, 5% profits rather than the use of leverage. The prevailing fundraising increased in 2014, substantially greater received commitments from a number of Lebanese F&B, 6% tendency has been to support the existing owners and than in any year since 2008. The significant increase in banks. Serv ices, 8% managers of target assets, while supplementing the fund raising activity by value in 2014 should provide • Jordan, the UAE and Morocco were also notably management team with additional resource where further impetus for new investments in the coming Source: Thomson Reuters - Zawya and Deloitte considered necessary. years. active in 2014, continuing the pattern seen since • Increasing smartphone penetration rates and a 2011. The number of F&B related transactions in the growing e-commerce sector have helped drive the • Venture capital fund raising gained traction in 2014, VC investments by region UAE was a significant factor, comprising over 50% of continued popularity of the information technology after a less active year in 2013 with VC funds raised at disclosed investments in the country, reflecting the and software sector with approaching 50 per cent of the highest level since 2008. VC investment volumes by region in 2014 scale of opportunity and attendant level of interest in all VC deals in 2014 in this sector, in line with sector smaller, early stage F&B ventures in the UAE. Others, 12% concentration trends since 2011. 4. Venture Capital In The MENA Region • The range of transactions across the sector Lebanon, 27% Egypt, 6% VC investments by sector was broad, spanning Arabic gaming, healthcare VC fundraising increased to the highest KSA, 6% technology platforms, online food delivery and online third party book reselling. levels since the financial crisis VC investment volumes by sector in 2014 • Reported exits from VC investments remain limited Morocco, 12% Telecom, 3% Healthcare, 3% VC funds raised and investments completed with two disclosed in 2014, although the level of Consumer goods, 6% activity is much higher when considering investment 250 60 Jordan, 21% 54 UAE, 15% Media, 9% in non regional VC owned start up businesses in 51 205 50 MENA. While there are limitations in the data 200 IT, 45% s provided, this may also reflect, in part, the nascent

en t F&B, 9% 40 Source: Thomson Reuters - Zawya and Deloitte m 33 t nature of the industry as VC firms focus on building 150 s

34 e m 32 v D 121 value in their portfolio companies. n

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U VC investment volumes by region 2011-2013

28 o

100 .

o Serv ices, 24%

20 N Others, 14% 50 26 29 10 Lebanon, 20% Source: Thomson Reuters - Zawya and Deloitte 2 - - 2009 2010 2011 2012 2013 2014 Jordan, 8% Funds raised (USDm) Total number of investments Source: Thomson Reuters - Zay wa and Deloitte UAE, 10% Egypt , 17% • Activity levels in the VC industry in 2014 remained broadly consistent with 2013. While the transactions by volume remain below those seen in 2011 and 2012, Tunisia, 14% the industry has been consistently more active in the Morocco, 17% period post 2010, suggesting a maturing and growing asset class. Source: Thomson Reuters - Zawya and Deloitte 18 MENA Private Equity and Venture Capital Report 05 19 MENA Private Equity and Venture Capital Report 05 Thought Leadership Thought Leadership

floor and in the board room may equate to So what can be done to encourage greater gender students reacted unfavourably to a resume of a female 5. Thought Leadership outperforming returns. According to a study of 3,000 diversity? venture capitalist but praised the identical resume of a listed companies published in late 2014 by Credit fake male counterpart. 5.1 Look for a return on gender equity Suisse, greater gender diversity in management In December 2012, the United Arab Emirates cabinet correlates with better financial performance, superior made it compulsory for corporations and government While we would wish such attitudes to change, return on equity and higher stock valuation. Since agencies to include women on their boards of realistically, we should recognise that ambitious By Hoda Abou-Jamra, Founding Partner, TVM Capital 2005, companies with more than one woman on the directors. This followed similar moves in Norway, Italy, women face a huge psychological barrier -- a fear of Healthcare Partners board have returned a compound 3.7 percent a year France, Belgium, Spain and Iceland. being unpopular. Many a private equity fund manager has pointed to more than those that have none. But when such policies and quotas are implemented Support from supervisors would help. But it appears modern portfolio theory to urge greater allocations Does this mean that better companies hire more – the reaction from corporate leaders across the world that women receive less mentorship than men -- to alternative investments. Diversification leads to women? Do women choose to work for the most appears to be fairly uniform. They say: “Fine. But possibly because male bosses are less comfortable superior risk-adjusted returns, the argument goes. successful companies? Or do women help improve where are all these women with the right experience, giving constructive criticism to women. Indeed, a Well, half a century since that theory was first corporate performance? So far, the answer is difficult expertise and qualifications?” 2011 Harvard Business Review study showed that developed; the private equity industry is finally turning nearly two-thirds of male executives report they are to deduce from the data available, but it’s likely that a It would be tempting to pass this off as male-inspired its attention to a different type of diversification, combination of all three is at work. hesitant to engage in one-on-one meetings with more and in my view, a more important one: diversity of resistance to change, but I believe it is a genuine junior female colleagues. people -- in age, ethnic background, and particularly Such a conclusion should be extremely thought concern that needs to be addressed. Set an example in gender. provoking for private equity, an industry built on the Psychology of success idea that an investment, coupled with an increase in As is the nature of hard-headed investors, this is not Although there are clearly challenges, I believe there financial and managerial acumen at a company, can Executives – whether male or female -- are obviously is momentum behind the move to get more women purely for emotive reasons or some romantic notion to add considerable value. not shipped into the boardroom straight from college. make the world a better place. into senior positions, thanks to the support of male They are made, and remade, by the companies they and female executives across the world. And as more It would be logical for private equity firms to work for and the colleagues they work with. So if we Increasingly, leaders in the corporate and investment encourage greater gender diversity at senior levels at women accede to key decision-making roles, it is world are realising that a mix of backgrounds, are looking for ways to encourage greater diversity, it important that they act as good role models, inspiring the companies they invest in. And because private makes sense to take a close look at corporate culture. viewpoints and approaches at a senior level promotes equity executives occupy board seats at portfolio other women to follow in their footsteps. better decision making in an increasingly globalised companies, it would make sense for the industry to It is clear that not enough women are on the well- market place, where investors, employees and We in the private equity industry are uniquely placed welcome more women into its own midst. worn track to the very top. But the curious thing is to play a positive role, by setting a good example customers are diverse. that so many start on the right path, only to lose their Regulation? ourselves when we employ women and by influencing Promoting diversity is good practice, not only way. Why does this happen? how our portfolio companies are run. because mirroring your customers provides a better In the Middle East, we are doing relatively well A 2014 report by Bain and Company suggested that At TVM Capital Healthcare Partners, for example, we understanding of them, but because encouraging in terms of numbers of women in private equity the divergent career paths for men and women are different points of view can unlock innovative ideas – although I would personally like to see many have actively encouraged strong female representation attributable to different levels of aspiration, and a in leadership positions at our portfolio companies, that can drive a company forward. more. Publicly available information for the investor relative lack of confidence among women that they members of the MENA Private Equity Association and we have benefited from diversity of thought and The link between diversity and performance is can attain senior positions. The report concluded approaches. This dynamic has helped promote open shows that women account for around 18 percent of that companies should intervene early in women’s increasingly coming under scrutiny. the sector’s senior leadership and investment teams. debate and transparency, and encouraged new ideas careers to instill healthy ideas of what it means to and innovation. For example, as financial performance has declined at This compares to 11.8 percent in Asia, 11 percent in be successful, encourage supervisors to offer strong fast food chain McDonald’s, the spotlight has turned North America and 9.7 percent in Europe, according support, and present clear role models from within the I believe that self-interest should be a great motivator on the relative lack of diversity and change at the top. to Preqin. However, on the corporate front, the region company. for promoting greater diversity in boardrooms and in The company operates in 119 countries, but as many seems to be lagging. According to Hawkamah, the the upper echelons of management. As private equity as 10 of its 13 non-executive directors come from number of women on the boards of publicly listed This may sound straightforward, but behavior patterns practitioners, we know from experience that our within the Chicago business community. And the companies in the six-country Gulf Cooperation are deeply engrained in men and women in the ability to create the right corporate culture is as vital average tenure of the governance committee, which is Council (GCC) region decreased from 60 seats – or 1.5 corporate sphere. to the creation of long term value at a company as our percent of total board seats – in 2008, to only 43 in responsible for appointing new directors, is 17 years. A Harvard University experiment, highlighted capital and expertise. 2011. This compares to a rise of female participation by Facebook COO and “Lean In” author Sheryl The argument for greater diversity in leadership is on boards globally from 9.6 percent of total seats in Sandberg, showed that successful women may be less also being bolstered by a growing body of research 2010 to 12.7 percent in 2013. suggesting that more women on the management appreciated than their male counterparts. In the study, HEALTHCARE PARTNERS

Investing in value creation in healthcare

years Dubai - Beirut - Munich - Boston 0 fi nancing innovation www.tvm-capital.ae in healthcare 3 Facebook “f” Logo CMYK / .eps Facebook “f” Logo CMYK / .eps 22 MENA Private Equity and Venture Capital Report 05 23 MENA Private Equity and Venture Capital Report 05 Thought Leadership Thought Leadership

About Hoda Abou-Jamra developments during the 20 years since 1995: • UAE home grown entities such as Payfort are 5.2 The 2nd Half of the Chessboard changing the payments landscape, providing Hoda Abou-Jamra has developed a passion for • In 1995, there were 35 million Internet users additional alternatives. Others, such as Bayzat, are channelling the power of investment to drive By Alvaro Abella - Managing Partner, BECO Capital worldwide, representing 0.6% of the population; as of focusing on employee benefits such as medical economic and social progress in a career that has end of 2014, there were 2.8 billion users, representing insurance encompassed private equity, pharmaceuticals and The commercialization of the Internet really started 39% of the world’s population political campaigning. some 20 years ago and since then the rate of change In spite of the above, the MENA region is still at a very in terms of market adoption, uses, etc. has been • In 1995, there were 80 million mobile phone users, early stage of development and a clear indication of A Founding Partner of Dubai-based specialist private exponential. or 1% of the population; as of end of 2014, there were this is the amount of dollars invested in the venture equity company TVM Capital Healthcare Partners, 5.2 billion, or 73% of the population. capital space compared to other regions of the world: she plays an active role in fundraising, corporate Prof. Erik Brynjolfsson, Director of the MIT Initiative on development and business development of portfolio the Digital Economy, has illustrated this exponential • The market capitalization of the top 15 public • The USA invests ca. US$50 billion into the VC space companies. Hoda currently is a member of the rate of change by recounting the fable of the inventor Internet companies was US$ 16.7 billion. Most of on a yearly basis or the equivalent of ca. US$150 on a board of UAE homecare provider Manzil Health Care of the game of chess: as the legend has it, the these public companies were listed in North America per capita basis; in the MENA region, we barely reach Services and has also sat on the boards of various Emperor asked that the inventor of the game of chess (only one in EU). Today the top 15 public Internet US$1 per capita companies and institutions, includingGulf Healthcare be brought before him to reward him for inventing companies have a combined market capitalization International. A pharmacy graduate from Bouve such a strategic and thought-provoking game. The worth US$2.4 trillion, with four of them in China! • India, on the other hand, has received 20 times College of Health Sciences, Northeastern University, inventor, being an intelligent man that he was, asked more investment in the VC space during 2014 than for a grain of rice on the 1st square of the chess board, • The mobile has become the prevalent access the MENA region, although in terms of Internet and Boston, Hoda began her career in the pharmaceuticals medium for Digital Media: more than 51% of time and biotech industry, working for Acumen Sciences, 2 grains on the 2nd square, 4 grains on the 3rd smartphone users India is only ca. twice as big. There square and so doubling the grains of rice with each spent on digital media today is via mobile. That figure are 110 million Internet users in MENA compared to Incyte Genomics, Boiron Laboratories, and Bayer was less than 10% in 2010 Corporation. subsequent square. By the time he reached the 32nd 240 million in India and ca. 60 million smartphone square at end of the 1st half of the chess board, he • Technology is not only impacting consumer behavior users in MENA compared to 111 million in India Her career in the investment arena took off in the had a quantity of rice equivalent to a large field of rice and uses in the main household spend items, such as United States, as the CEO of BostonBioCapital, and as which would have made him quite rich. The power of However, we have recently seen some very noticeable housing, transportation and food- but transforming transactions. This is a sign of bigger things to come: the founder and CEO of the non-profit “think tank” exponential growth really then ignited in the 2nd half business processes as well. “Enterprise” entrepreneurs organization The BioExec Institute, Inc., before she of the chessboard: by the 64th square, the Emperor focus on business pain points: companies like Square • Yemeksepeti out of Turkey was sold for US$589 teamed up with TVM Capital, a US$ 1.5 billion global would have needed to compensate the inventor with and Stripe are changing how payments are processed. million private equity and venture capital firm, to establish an amount of rice larger than Mount Everest. The Others like Zenefits are changing the way HR TVM Capital Healthcare Partners to invest in the point of the story is, exponential increases initially processes benefits and employee data • Souq.com received in aggregate US$300 million MENA region and India. Hoda has played key roles look like linear ones, but they’re not. As time goes by, from South African Internet holdings company on several U.S. finance and fundraising committees, exponential growth far outpaces our intuition and These trends are not unique only to the more mature Naspers as well as Tiger Global, the US VC firm, at including Senator John Kerry’s Campaign Finance expectations. and developed markets of the USA and Western close to US$1 billion valuation Committee, the Massachusetts Women’s Political Europe. They are just as prevalent in our Middle East • Talabat out of Kuwait was sold at a valuation of Caucus and the BIO Business Forum Committee and Today, according to Prof Brynjolfsson, we are in and North Africa (MENA) region as well: US$170 million the International Subcommittee. the 2nd half of the chessboard of the IT revolution, ready for explosive growth. Assuming that the birth • In the year 2000, there were just under three million This increase in exit values is also in line with the More information on www.tvm–capital.ae of Information Technology was in 1958, and using Internet users in the MENA region. Today there are developing trend, whereby the time required for Moore’s law that predicts the doubling of chip close to 110 million Internet users digital businesses to build value and exit is actually performance every 18 months, we entered the 2nd • Facebook, Twitter, Instagram and others have shortening: whereas companies that were founded half of the chessboard around the year 2006. In doing become household names in our region for social pre-2005 such as Maktoob and Zawya were exited so, the technological changes that we will witness interaction and messaging. Facebook reports that after ca. 11 years. The more recent exits of Dubizzle over the coming decades will be truly amazing. 90% of their 80 million users in the MENA region and Talabat happened 8 years after founding on Some of the most recent ones seemed far-fetched access their accounts via a mobile device, compared average. only a few decades ago: think of driverless cars with 60% to 80% in Western Europe (Google), computers’ ability to engage in complex This evolution in technology adoption is at the core communication (Lionbridge’s GeoFluent), nano- • Recurring household expenditure items such as of our investment strategy at BECO. We are investing technology applied to medicine, and many others. housing, transportation and food are also being in companies that ride this trend; solving local addressed by homegrown tech-based offerings such problems for businesses and consumers, building But first, let’s look at some of the most outstanding as Propertyfinder, Careem and Talabat marketplaces that bring consumers and businesses 24 MENA Private Equity and Venture Capital Report 05 25 MENA Private Equity and Venture Capital Report 05 Thought Leadership Thought Leadership

together and creating efficiencies that never existed The political stability of the Kingdom was largely The Supportive Upturn in the Investment Cycle before. We strive to identify and support the leading 5.3 Opportunities and Challenges for unaffected by the Arab Spring. The Kingdom entrepreneurs that will build the break-out companies Private Equity in Saudi Arabia therefore, became a safe haven for international The investment cycle in Saudi is on the upturn and in the MENA digital space. We have backed businesses investors whose investments in the Kingdom reached many funds seem to have good traction in fund such as Propertyfinder, that allows consumers to By Alkhabeer Capital $775.8 billion as of November 2014. This position raising. The primary markets are also showing find the right property for rent and/or sale in an is also supported by the smooth transition in power encouraging signals. According to Bloomberg, Saudi Saudi Arabia ranked 26th amongst 118 countries on efficient and transparent manner; Careem, that allows witnessed lately, as King Salman took reign after the Arabian companies raised SAR 25.23 billion through the PE Country Attractiveness Index in 2014 corporate users and consumers alike to book cars death of King Abdullah bin Abdulaziz al Saud on 23rd share sale in 2014. with drivers either on demand or on a pre-scheduled A thorough understanding of Saudi’s business culture January 2014. The government’s economic and regulatory reforms basis throughout 16 cities in the MENA region; and and social setting is crucial to navigate through the PE Youth in Saudi make up 50% of the total population, will help in bringing in much needed funds. As part of Bayzat, that helps corporates choose the most efficient space a rate higher than the global average. The overall these efforts, the CMA recently approved the opening medical insurance for their staff. up of the Saudi Stock Market to Foreign Institutional The Saudi economy offers a promising proposition population is estimated to have grown by 2.6% in Investors (FIIs) by mid-2015, which is expected Netscape, Yahoo!, eBay, Amazon in the USA (since for PE funds, according to Alkhabeer Capital. A 2014, Favorable demographics represent a great to promote transparency, corporate governance 1995); Tencent, Alibaba and JD.com (since 2000) combination of both favorable demographics and potential for the growth of consumption-oriented and better reporting systems and to contribute to were all the catalyst companies that helped launch fresh initiatives by the government has helped to sectors. Investors are willing to invest at higher attracting PE investment. Similarly, the Saudi Arabian the development of the digital economy in their expand the non-oil sector in the Kingdom with valuations if the proposition and supporting factors General Investment Authority, SAGIA has introduced respective markets. Which will be the catalyst private sector growth also being very supportive of PE are right. Examples include a ‘fast track’ service that guarantees decision on companies in our region? investments and inflows into the Kingdom. Another • The acquisition of fast food chain Kudu, at an licensing applications for businesses within 5 working important driver for PE is the lack of funding for SMEs Alvaro Abella earnings multiple of close to 20X. days, subject to authority approval. and family owned business from banks, which stands close to 2% compared to a global average of 20%, Managing Partner, BECO Capital • In manufacturing, a good example was GE and the The Winning Strategy although SME’s contribute 12.8% of the Kingdom’s Saudi Industrial Property Authority’s announcement to Sources: GDP. Moreover, with oil prices declining banks are set-up a facility in Industrial City in Dammam; as part When it comes to generating healthy deal flows, 1. “Race Against the Machine”, Brynjolfsson, McAfee, becoming overly cautious, demanding tougher of a $1 billion plan; a move also expected to create Alkhabeer believes that the buyer and the seller have Digital Frontier Press, 2011 lending conditions. This represents an opportunity for jobs for the Kingdom’s youth. to keep in mind some key winning considerations such PE players to come in and act as an alternative to bank as; understanding the social setting and the business 2. InternetWorldStats financing. • Late King Abdullah was a big supporter of the culture in Saudi Arabia, strengthening aspects of education sector, which is valued at an estimated $36 corporate governance such as succession planning In 2014, Saudi Arabia maintained its ranking in 3. Facebook Audience Insights billion in the GCC. He approved a 5-year plan worth which addresses the sensitive issue of ownership the 26th position amongst 118 countries on the about SAR 80 billion to build 1,500 nurseries and train 4. Internet Trends 2015 report, KPCW rights. PE Country Attractiveness Index, leading all GCC 25,000 teachers. However the quality of education countries. This was primarily driven by having the still lags behind global standards and there will be PE partnerships depend primarily on value creation highest economic activity, depth of capital markets, substantial scope for improvement which the PE and positioning the company for future growth and and investor protection within the GCC. Kuwait players will be interested in. profitability, therefore, a successful PE investment in ranked as the least attractive in the 72nd place. a company must have a pre-decided exit strategy to However, investing in the GCC’s largest economy, • Healthcare also receives significant investments avoid conflict. It should also have a stipulated lock-in worth $752 billion in GDP, does not come without from the government. Rising population and growth period to ensure management does not lose interest challenges. in lifestyle-related diseases has increased the need to in the venture. Finally, families could incorporate an build sophisticated healthcare centers. Excitement exit clause that allows them to buy back the investor’s A Politically Stable and Top Performing Country within to invest in this sector is evident from the increased stake to mitigate the risk of losing the controlling the G20 Economies investor interest for the Al Hammadi Company IPO stake. which was oversubscribed by 12x. Saudi Arabia has consistently outpaced global growth In conclusion, the Kingdom is largely becoming and has expanded at an average of about 5.25% for Another large-scale opportunity exists for PE in the a very attractive private equity destination with the last 5 years; a growth rate which is higher than infrastructure sector, which is expected to attract large various promising investment propositions. that of both MENA and the GCC. This growth is investments. Increasing openness to public-private The encouraging performance, favorable primarily driven by large infrastructure investments partnerships in infrastructure projects could underpin macroeconomic activity and government initiated by the government and the non-oil sector PE’s role in contributing to infrastructure development initiatives to expand the non-oil sector, supported contribution. in the nation. by a young and active population, are major 26 MENA Private Equity and Venture Capital Report 05 27 MENA Private Equity and Venture Capital Report 05 Thought Leadership Thought Leadership

factors driving PE investments in the Kingdom. lack of funding, at least in the critical phases of the created funds, or rebranded their CSR7 programs as to launch its focused VC efforts. The opening of equity markets to foreign investors startup’s life cycle. VC funds. Yet, the operation of these funds is ad-hoc, is likely to generate significant PE interest as it and anything but structured. Conclusion would pave the way for better market depth and When you start late, as we all did in the Middle East compared to Silicon Valley, you need to focus on One of the recently launched Government programs Startups are living a golden era, or at least about hence, easier exits. PE investors, however, should to start one. Countries with startup support be aware of the unique local market characteristics startup in the beginning and the middle of their to address part of this problem, pertaining to early journey, and not just at the end. Startups, as most stage VCs, is the Musharaka program from Takamul8. organizations, which have tried to fill the funding and the cultural aspects of doing business and gaps by proper distribution of funding, have more building relationships. graphic designers depict them, are like small plants. This program guarantees low profit Shari’a compliant To grow a plant you need to plant the seed, water loans to cover 50% of an approved VC fund. We successful startups. Problem is not the lack of funds, it, take care of it, before you can see the fruits. Most expect an acceleration in the creation of VC funds due otherwise oil rich countries would have created their 5.4 Startup Pains and the Funding funds in Saudi Arabia, however, are focused on to such a government initiatives. However, we have to own Facebooks, Apples and Googles. It is the wise Gap in Saudi Arabia growing fruitful trees into forests, as they are more see more seed funding. Seed funds are rarely private distribution of funds, over support organizations focused on later stage startups, and less concerned sector driven, unless they are very limited through covering different startup phases, in addition to high Khalid Suleimani - Head of Venture Capital at with seed funding, accelerators, and nurturing of accelerator programs. The risk of seed funding is quality modern education. It is no surprise that the Alkhabeer Capital. ideas. Ideas can be seeded not only by enhancing so high, that the private sector rarely intervenes. top IP based startups came out of the top educational modern education, but also by introducing more Governments encourage seed funds in order to help institute in the region such as KAUST. However, great Author of “84 tips to a successful business startup” entrepreneurial programs in universities. The increase launch startups, build a knowledge economy, or ideas come also from great entrepreneurs, regardless of their education, and those, we need to incubate, Since the announcement of the Saudi National Science in influx of ideas lately can be attributed partially to motivate creating jobs in the long run. the launch of a number of entrepreneurship centers, accelerate, and fund. In order to do that, we need to and Technology Innovation Policy (NSTIP) in 2005, On the near end of the funding spectrum, there is the distribute the finances accordingly, and launch more aimed at transforming Saudi Arabia to a knowledge thereby increasing awareness of entrepreneurship’s 4 discovery or ideation phase, where ideas are turned seed funding, acceleration programs, and early stage based economy, and giving KACST1 the responsibility potential and role, or as Bill Aulet suggested it as: “The New Cool Thing.”5 Yet, these entrepreneurial into products. KACST-Badir program has over 6 active VCs in the country. to monitor it, there have been great strides towards incubators, of its announced 11. MOL9 supported improving the eco system for startups in Saudi Arabia. ideas need money to become startups. This is where Alkhabeer Capital is specialized in asset management Lebanon, Jordan, and the UAE to some degree, one private accelerator with Qotuf and FLAT6Labs. NSTIP is in four phases, with a five years duration for MTVC10 launched AccMakk, and KAUST11 has just and investment advisory services. It is licensed by each2. 2015 marks entering the third phase of this have an advantage as they do have programs for Saudi Arabia’s Capital Market Authority (CMA), license incubation, acceleration, seed funding, Angel groups, rebranded its program as “New Ventures accelerator”, 20 year plan, where over SAR 8 billion were spent to and launched a new “Hikma” IP Accelerator last # 07074-37. date, and a lot has changed since then. SBIN3 compiles and Venture Capital (VC), which started earlier than February. KAUST has been the most successful in 1 a list with all the government and semi-private Saudi did. Hence, it should not be a surprise that most King Abdulaziz City for Science and Technology successful startups come out of these countries. launching IP based startups, with high potential of entities supporting startups. Their last list shows scaling internationally. Yet there is an obvious lack of 2 BADIR Overview: Incubating the future. Presentation over 40 entities all over the kingdom giving services Even though there are more than SAR 2 Billion of funding at the seed stage, once a prototype is created, by BADIR, 22-Aug-13. to startups ranging from incubation, acceleration, funds allocated by the Saudi government, such as needs improvement, or needs market validation. So 3 Saudi Business Incubation Network. www.SBIN.org. training, to funding. Quite a leap from 2005, when Taqniya and the four techno valley funds, and by large far, KAUST and MTVC seed funds are the most active sa none of this existed. NSTIP should get credit for companies such as Saudi Aramco, to help startups, the in that area, and have graduated a few projects. the great awareness spread about startups, and the mandates of these funds do not necessarily address However, they are not enough and the problem gets 4 “re-branding” of entrepreneurship in the country. Managing Director of Martin Trust Center for MIT the startups’ funding needs as far as its lifecycle phase even bigger afterwards. Entrepreneurship-MIT Entrepreneurship may have existed as an activity, is concerned. Startups pass through 5 phases during but was never considered an “acceptable” career their lifetimes namely: Ideation, validation, launch, Once a company is launched, it needs to cover its 5 Keynote Speech at the 7th MIT Enterprise Forum option for the previous generation. That generation’s growth, and transition6. There is a concentration running expenses in order for it to concentrate on Arab Startup competition. American University at ambition was geared toward government posts, or of funding and support on the two ends of the the business of further improving its products and Cairo. May 22nd, 2014 presumably more secure jobs in large conglomerates. spectrum, and a huge gap in the middle. This is acquiring new customers. The Valley of Death, where most startups fail, overshadows the phases following 6 Khalid Suleimani,” 84 tips to a successful business Yet, with all of this, we have heard of less than a what we call the “funding gap.” Most of these funds startup”, Amazon 2014. are focused either on later stage startups, sometimes ideation and until achieving enough growth and handful of startups that have made it in the past few revenues to cover costs - the phases where big-bucks years. By that, we mean a startup that has developed acting more as private equity fund than VCs. While 7 Corporate Social responsibility. some investments in early stage startups have been are required. No government fund is fully supportive its innovation into full production, or has been 8 made, however, these are negligible compared to of startups in these Phases, let alone seed funds. SIRB Investment Arm of Ministry of labor and HRDF. profitable and is operating on self-funding, or had a Business Angels, a KACST sponsored angel group, the size of the overall funds. Many funds are not 9 successful exit event. There are many problems facing covers earlier parts of this area, along with Oqal Ministry of Labor. startups, ranging from proper regulation to lack of structured as VC Funds and are rather operated as holding companies. Some private companies have Angels. Yet the big money required in the following 10 Makkah Techno Valley Company. protective laws against unfair practices, in addition to phases, namely Series A through D rounds, are in shortage. This is why Alkhabeer Capital chose this area 11 King Abdullah University of Science and Technology. 28 MENA Private Equity and Venture Capital Report 06 29 MENA Private Equity and Venture Capital Report 06 Survey Survey

6. Survey 100% leading to opportunities for PE.” “The cost of healthcare provision in the region means there will be more transfer from government to the Deloitte and the MENA Private Equity Association are 80% “Deal numbers will increase. As a result of a lot of private sector. Consumer spending power in the GCC pleased to present their survey of confidence levels 65% excess capital – combined with recent exits – there are drives the retail and F&B markets, so these remain within the regional private equity industry. The survey 60% 53% a few funds flush with cash who will be under pressure areas of high interest for private equity investors.” addresses the key issues facing fund managers and to do deals. This may lead to price inflation, with the 41% potential for more deals getting done.” “The oil and gas sector may offer opportunities on a acts as a barometer for changing attitudes. 40% 35% counter cyclical basis.” 6.1 Survey of General Partners (GP’s) in 20% INDUSTRY SECTORS “We are expecting an increase in IT-related deals, but 6% still any consumer-led sector has a strong appetite due the MENA Region In which industry sectors do you expect to see most 0% to the dynamics of the region.” Decrease Stay the same Increase deal activity over the next 12 months? The survey focuses on GPs in the MENA region. 2013 2015 “Deal activity will be in the consumer-driven sectors The aim of the survey was to obtain a greater 2013 2015 2% such as healthcare and education but valuations are understanding of the sentiments of the MENA region’s 6% 4% 2% 4% aggressive. We have walked away from a lot of deals PE industry from the perspective of GPs. 21% 4% • Market confidence has tempered slightly from 2013, 4% 28% because seller expectations are still way too high.” with only 53% of respondents expecting an increase Methodology 18% in investment activity over the next year. While the 15% 9% GEOGRAPHY The survey was prepared by Deloitte and was main reason for increased volume is the high levels of 11% conducted in a series of face to face meetings and dry powder for both private equity and corporates, 13% Over the next 12 months, which particular countries teleconferences in the second quarter of 2015. the ongoing trickle-down effect of low oil prices, 15% will see the majority of regional investment activity? 20% 22% Participating firms had investments in a range of coupled with the lack of a demonstrable track record industries across a wide geographical area. for many managers means some respondents were 2% 2015 Consumer/Retail Food 0% 2% cautious. Education Pharma/Biotech/Healthcare 10% Scope Of The Survey Real Estate/Construction Power/Oil & Gas/Mining • In contrast to 2013, when no respondent expected Financial services 2013 The survey briefly examines the impact of the Infrastructure 5% 8% 34% a decrease in investment activity, 6% of respondents Hospitality Other economic downturn and political instability in the thought this likely. 13% 42% region during the period of 2013 – 2014, and aims to With a reduction in expected deal flow from 24% understand GP expectations and views around the “The recovery in real estate and the equity markets oil & gas-related businesses, GPs are looking outlook for 2015 and beyond. has meant investors are looking for other asset classes, to consumer-driven and defensive sectors for 29% while companies are looking to raise capital. However, investments over the next 12 months 3% Despite the strong underlying macroeconomic reasons the value gap between buyers and sellers still takes for growth in the region, the knock-on effect of the some closing.” • Consumer-driven, defensive sectors are expected to 27% low oil price is resulting in a more cautious optimism remain the main focus of investments over the next 12 from the last two surveys. 53% of respondents expect “There is dry powder in the industry creating Saudi Arabia Egypt UAE months, due to the underlying regional demographics Turkey Iraq Jordan an increase in investment activity over the next year, deployment pressure, but the question is how and growing levels of discretionary spend. Around Other down from 2013. confident investors are in business prospects.” 50% of respondents consider retail and consumer The increase in perceived political stability in “There will be a decrease given there has been no businesses (including food and beverage) to be the Egypt has resulted in a significant rebound in 6.2 Survey Results change in the sophistication of the market for PE most in-demand sectors. interest from investors. KSA and the UAE remain investments, there is limited accessibility to debt highly attractive countries due to favourable • There is increased interest in the education sector demographics and strong domestic economies financing and many managers lack a credible track (20% of respondents). INVESTMENT ACTIVITY record.” from residual oil wealth • The main change since 2013 is the decrease in the Over the next 12 months, what do you expect to “Family groups will be the main driver of investment • The main change in expected geographic deal flow happen to investment activity in the MENA private number of expected deals in oil & gas. The low oil since 2013 is the significant bounce-back in interest activity as they are becoming increasingly open to price resulted in a number of aborted deals in 2014/15 equity market? outside investment. There is already a lot of support in Egypt, which was considered too risky for many in and there is a nervousness about M&A opportunities 2013. for Egypt which will continue. We will see more in the recovery. GCC-wide businesses as firms grow out of their home • 27% of respondents (up from 3% in 2013) consider countries. Family groups are maturing, which is it a high-priority country. 30 MENA Private Equity and Venture Capital Report 06 31 MENA Private Equity and Venture Capital Report 06 Survey Survey

• With this resurgence in Egypt, there is an increasing set to increase their proportion of deal activity over COMPETITIVE DIFFERENTIATORS markets people know what will happen post PE concentration of target geographical area for regional the next 12 months, the market is still expected to be investment. In this region, many struggle with it PE houses. Around 85% of respondents believe their dominated by domestic PE funds What do you believe are the most important emotionally. A principal owner often still retains investment activity will be centred purely around KSA, competitive differentiators for private equity firms in control and the initial mindset can be difficult to Egypt and UAE over the next 12 months. • 42% of respondents consider domestic PE funds will the MENA market when it comes to winning deals and change, so you need to hold their hands through that. be the most active investors in the region over the why? Aligning interests is always a challenge.” • Outside of these big three, there is sustained interest next year, as a result of some significant fund raisings from MENA PE firms in Turkey as a key market, despite and the level of dry powder. “The reality is that there are not a lot of proprietary recent macroeconomic uncertainties. 0% 10% 20% 30% 40% 50% 60% 70% deals in the market so having a strong network is key • Family offices are expected to be the next most to finding them.” • Continued turmoil in Iraq and Syria practically rule active investor, and are increasingly interested in direct Ability to add value 59%

out these countries as current markets of interest. investments rather than committing money to blind Reputation/brand 53% pools. EXIT ACTIVITY “The stabilized political situation in Egypt offers a Networks/contacts 47% major opportunity for investors. The UAE continues to • There is an expected rebound in activity from Over the next 12 months, what do you expect to benefit from its status as a regional hub.” sovereign wealth funds, with several having an Chemistry/company relationship/trust 29% happen to exit activity in the MENA private equity increased focus on domestic investments compared to market? “In KSA families are going through rationalization outbound in the past. Sector specialism/knowledge 18% as the second generation takes over. Egypt is a big Other 29% population and a recovering economy. The upswing in • While there has been interest from foreign PE funds 100% Egypt is already underway.” in large regional deals, their relative scarcity means

respondents do not consider them to be as active in 80% “We have looked at Egyptian deals, but the two issues the next 12 months. are: 1) long-term geopolitics, and 2) the economic Note: respondents could each provide multiple differentiators 59% volatility leads to currency risk, so that rules out sectors “Major fund raisings by domestic fund managers they think are most competitive 60% 53% that are mostly reliant on imports.” will play a part and family offices are showing an 41% increasing appetite for direct deals.” • More than half of the respondents consider the 40% “We are still very interested in KSA. There are ability to add value to be amongst the most critical 24% 18% macroeconomic factors that support the substantial “There will be less activity from international investors when it comes to doing deals in the region. This 20% population growth. In Egypt there is access to a talent as they need to find deals of real size. I expect to see is deemed especially important in growth capital 6% pool. Elsewhere, Morocco is an attractive proposition: family offices being active, but they will be impacted if situations. 0% “more stable and there is increasing governance.” a downturn leads to a fall in excess liquidity from their Not sure Decrease Stay the same Increase operating companies to fund deals.” • Respondents consider price as significantly less INVESTORS import than other factors. 2013 2015 “Family offices are increasingly trying to take direct The majority of GPs expect the number of exits to Over the next year, which types of investor do you stakes, moving away from blind pools, as they want • Given the size of deals in the region, the ability increase as LPs seek returns. However, in contrast expect to be most active in the MENA private equity to ‘see, touch and feel’ a transaction. As they are not to add value to the company is deemed the most with previous years, some respondents suggested market ? restricted by the time issues, these investments can be important factor when doing deals exits will decrease due to economic uncertainty strategic.” “It’s vitally important to have a similar culture and be and a softening of exit routes 45% 42% 43% 40% 39% “Several SWFs are currently slightly restricted by the aligned on goals, especially in growth capital when • In 2015 there is a higher division of opinion on exit 35% dealing with a founder or a family-owned business. 30% fall in oil prices, and non-regional investors will be activity than in previous surveys. While the majority of 30% more cautious given the geopolitical environment” And networks are seen as a real differentiator; often respondents believe that exit activity will increase over 25% the company doesn’t necessarily want our input on 20% the next year, there is an uncertainty more than in 15% operational issues, but wants our help in growing the previous years about GPs’ ability to realize the returns 15% 11% business.” 10% 6% needed, which may result in some assets being held 4% 3% 4% 3% 5% “The ability to add value is key for growth capital and on to for longer than ideal timeframes. 0% Domestic PE Foreign PE Family Offices SWFs HNWIs Other secondary market opportunities. In buy-outs price is Fund Fund • There is increasing pressure on GPs to monetize more important.” 2013 2015 returns on assets held in vintage funds from the pre- Global Financial Crisis period. Although government-backed investment firms look “Chemistry is important – people deal with you if they like and trust you. Trust is key. In the developed 32 MENA Private Equity and Venture Capital Report 06 33 MENA Private Equity and Venture Capital Report 06 Survey Survey

3% • One potential limiting factor is the perceived • New investments and portfolio management are Around 60% of respondents expect to raise new 10% 15% 3% availability of exit routes. Respondents expressed expected to be the activities GPs spend the majority of funds over the next twelve months, although the concern over the state of the IPO markets as well their time on. majority of respondents expect this process to be 5% as appetite of corporate buyers to buy PE-owned as or more difficult than in previous years. 13% businesses. • With several funds raised in 2014/15, fundraising is 5% expected to be less of a primary focus in the coming • Respondents may have indicated that they will be “Funds are under pressure to exit, but there are a lack 12 months after a surge in 2013. spending less time on fundraising in the coming 12 8% of strategic buyers in the region willing to pay for months, but c.60% still reported to be raising new 10% synergies. markets are still difficult, and secondaries • The amount of time spent on exits is expected to funds during this period (down from c.67% in 2013). 8% decrease partially, in line with the slightly softened are very uncommon.” Growth capital was the most common fund type 10% 10% expectations highlighted earlier. being raised. “Economic and political uncertainty means buying Exits opportunities / ability to exit prices will hold or soften, making exits more difficult. “Most of our time is spent on new investments at the • Over 85% of respondents considered fundraising Fund raising Results may trend down and the IPO markets have moment. We are very active at present and believe to be as or more difficult than in the last 12 months. Oversupply of capital/competition the environment is favorable to deploying capital in Market regulation cooled.” This includes some macroeconomic factors from the Human capital deficiencies the next 12 months.” knock-on effect of a sustained low oil price, together Lack of debt finance “We do not see a lot of exits in the next 12 months. with potential systemic changes such as challenges to Legal framework variances Exits are always a challenge in the region. The pre- “Our time is split fairly evenly between new Shortages of quality investment opportunities investments, portfolio management and exits, but the private equity model, and ability of GPs to show Governance/transparency 2009 vintages have probably still not recovered post LPs a demonstrable track record. Portfolio company challenges GFC and Arab Spring meaning the assets are not at a real focus in the coming months is raising the Lack of acceptance of PE the desired level. Therefore, although there is pressure new fund and this will be taking priority. We have “For local private equity managers – and especially Other to exit, we think it will be in two years.” almost completely divested the Fund 1 portfolio, and those who are recently established – fundraising is Note: respondents could each provide an unlimited number showing recent successful exits has been beneficial for difficult. Financiers in this part of the world are very of challenges and barriers they think need to be overcome this fundraising round.” GP TIME ALLOCATION risk averse and tend only to take on PE-level risk if • As in previous years, respondents cited a wide variety a relationship or existing facility exists. We’re also Over the next 12 months, which elements of your “We are closing our new fund shortly, so after that of challenges faced by private equity in the region. seeing a change in the global view and challenges to business do you expect to spend the most time on? time will be split between new investments for the Aside from fundraising and exits as detailed earlier in fund and management of the existing portfolio the closed-end or fixed-term fund structure, which is this report, the largest challenges are reported to be adding further difficulties.” 100% companies from previous funds. We are very hands- capital-related (oversupply, leading to competition, on with our portfolio companies, both [in terms of] “More due diligence is being done by investors. but lack of debt finance) and legal/regulatory. operational improvement and helping growth.” 80% People just take a lot of time. LPs in this region are still “The legal framework in the region is a challenge with FUNDRAISING cautious.” high barriers to investing in certain industries and 60% “Some risk-averse limited partners are sitting in the markets, e.g. healthcare in KSA and further education Over the next 12 months, how difficult is fundraising US and asking themselves ‘Why should we look at the in Egypt. And there does not appear to be discernible going to be? progress legally. Foreign ownership restrictions have 40% 32% Middle East at the moment?’. It seems that emerging 29% caused issues for us.” 27% 27% markets are currently out of favor given the growth 23% 23% 21% 18% seen in the developed markets.” “The lack of maturity of the market means it is difficult 20% 13% “It’s a short-term problem. We will come out of the for many managers to demonstrate a track record. Firms should do more to publicize their successes.” 0% oil price issue and the macroeconomic environment Portfolio New Exits Raising new will improve, meaning more investing in funds. Also, management investments funds “Market regulation and the legal frameworks are the this is a transition period for families - new groups of big ones. Some of the restrictions generally in place 2013 2015 families coming through who will be a good source 31% 56% across the region can hinder the freedom to do what of investment into funds. They now have a more you want with a business.” The level of time spent on fundraising has disciplined asset allocation policy.” decreased, with GPs spending the majority of “PE in the region is still difficult. At the moment we their time on new investments and portfolio CHALLENGES AND BARRIERS are concerned about exits as we have assets at the management in order to maximize returns for LPs end of our ideal hold time. But the IPO markets have What do you see as the biggest challenges and More difficult Same level of difficulty Less difficult cooled, which does limit options. And there’s a lot of barriers to growth for the MENA private equity competition for deals at the moment. Not only is there industry to overcome? 34 MENA Private Equity and Venture Capital Report 06 35 MENA Private Equity and Venture Capital Report 06 Survey Survey

a lot of dry powder, PE is far from the only option: don’t affect us fortunately as we are locally owned, in MENA. The perceived importance of oil-derived LONG-TERM CONFIDENCE there are increasing levels of peer-to-peer funding which gives us a significant advantage as otherwise liquidity has decreased as respondents considered the options and SME lending.” they can create complexity and be limiting. The effect of a halving in oil prices since 2013. On a scale of 1-10 (10 being the highest), how capital markets regulations are archaic, not allowing confident are you in the long-term growth prospects LEGISLATION free floats or free pricing.” “Urbanization in Egypt will drive growth. Most of the MENA private equity industry? governments (especially in the GCC) have low levels If you could change any element of the legislation “One of the biggest issues across the region is the of debt. Banks are relatively unsophisticated in 2013 2015 affecting the MENA private equity market, what inconsistent regulatory framework and its often respect of SMEs, which means PE is a viable source would it be and why? inconsistent application; not just across the region, of funding especially if the PE firm can add value as but it can be an issue within the same country. And well as finance. Currency risk is important and the 7.4 7.5 12% changes to regulation are generally not pro-business. dollar peg mitigates this; it is especially important for The biggest example for us and many others is the global investors in reducing uncertainty. I do remain 10 10 4% 32% changing regulations in KSA regarding Saudization. surprised at the relative lack of external investment in It’s the uncertainty which is making us more hesitant the region; it is the diamond in the rough.” 9 9 8% to invest.” “It is a growing region in terms of young population. 8 8 8% REGIONAL STRENGTH OF MENA People have more purchasing power in the region. Oil prices will have a short-term impact, but government 7 7 What do you see as the key strengths of MENA spending on infrastructure will continue long-term as 6 6 relevant to the long-term growth of the private equity there is still a lot to do compared to mature markets. 16% 20% market? This has a knock-on effect.” 5 5 0% 20% 40% 60% 80% 100% “Growing population, GDP per capita and increasing 4 4 Foreign ownership restrictions spend per capital are the underlying economic Capital Market regulations/Listing rules Favorable demographics Laws that cater better for PE style investment 71% strengths and there has been a lack of consolidation 3 3 Inconsistent regulation across the region Market Growth in certain sectors which creates opportunities. PE has Alignment of tax structure between countries 24% 2 2 More regulation to drive better corporate governance so far focused on the sectors that will benefit from a Domestic economy 24% Other growing middle class, but it can’t rely on that forever.” 1 1 Note: respondents sometimes provide a number of elements Liquidity due to oil wealth 18% they find are affecting private equity in MENA Geographical location 6% 0 0 • The biggest legislative hurdles that make getting Other 47% deals done in the region challenging have remained consistent: foreign ownership restrictions and capital 2013 2015 market regulations. Note: respondents could each provide an unlimited number • Several respondents reported that the regulatory of strengths they think are most relevant for long-term framework hampers activity. growth • Other issues included the ability to enforce contracts Favorable demographics are seen as the largest more effectively, and the need to increase minority facilitator for growth of private equity in MENA; shareholder protection. these are seen as more important given the “Regional listing rules are still unhelpful; what would decrease in oil-based liquidity. However, there are help is the public markets being more unified, and a broad range of factors that respondents cited as being real strengths of the region including GDP changes in the listing rules making it easier to sell Despite the considered view on the present per capita, currency stability, SME growth and secondary shares. Aside from the capital markets, economic situation, and the effects (both known government spending programmes the regulation of key sectors in certain jurisdictions and unknown) currently foreseen as a result of remains a barrier to private equity investment” • The aftershock of the oil price decline has had a the oil price dip, long-term confidence amongst “Foreign ownership restrictions are the big one. They significant effect on respondents’ views on the key private equity professionals has increased strengths that will enable growth of private equity marginally since 2013 36 MENA Private Equity and Venture Capital Report 07 37 MENA Private Equity and Venture Capital Report 07 Appendix Appendix

7. Appendix AlKhabeer Capital Capital Trust Group Eversheds Jeddah, KSA The Euromena Funds Global Offices: Abu Dhabi, Amman, Baghdad Riyadh, KSA Beirut, Lebanon Doha, Dubai, Erbil, Riyadh (in association with Dhabaan& Partners) 7.1 About The MENA Private Equity Tariq Hayat United Kingdom Association T: +962 6566 0511 T: +966 12 612 9394 United States of America [email protected] [email protected] T : +961 1 368968 www.eversheds.com www.alkhabeer.com www.capitaltrustltd.com

Gulf Capital Al Masah Capital Cedar Bridge Partners Abu Dhabi, UAE Dubai, UAE Dubai, UAE Al Sila Tower, 25th Floor - Sowwah Square, Al Maryah Abu Dhabi, UAE [email protected] Island The MENA Private Equity Association is a non-profit entity dedicated to supporting the private equity (PE) Kuwait www.cedar-bridge.com T : +971 2 671 6060 and venture capital (VC) industries in the Middle East Singapore and North Africa and acts as an Ecosystem enabler. [email protected] T: +971 4 453 1500 Colliers International The Association aims to foster greater communication www.gulfcapital.com within the region’s private equity and venture capital [email protected] Dubai , UAE networks and facilitates knowledge sharing in order to encourage overall economic growth, and will actively www.almasahcapital.com Al Shafar Tower 1, 12th Floor, Office 1204 - Tecom C Growthgate Capital promote the industries’ successes to local stakeholders Site, Al Barsha [email protected] and build trust with investors, regulators, and the T: +971 4 453 7400 public regionally and internationally. Amwal AlKhaleej Manama - Bahrain Abu Dhabi www.menapea.com Riyadh (HQ), KSA, Road 1704, Diplomatic Area 317, Building 247, Office TNI Tower, 2nd Floor, Zayed the 1st Street, Khalidiya T: +966 11 216 4666,[email protected] 653 T: +971 2 619 2460 Dubai - UAE 7. 2 Members Directory Dubai, UAE

T: +971 4 327 5875,[email protected] Level 11, Emirates Towers - Sheikh Zayed Road, Abraaj Group Dubai Silicon Oasis Authority Cairo, Egypt T: 971 4 3302220 Dubai International Financial Centre (DIFC), Gate Headquarters Building Village 8, 3rd Floor T: +202 2736 3742,[email protected] Beirut - Lebanon PO Box 6009 Global Offices: Istanbul, Mexico City, Mumbai, www.amwalalkhaleej.com Beirut Central District, 157 Marfaa Saad Zaghloul Nairobi, Singapore, London Dubai, UAE Street [email protected] T: +971 4 501 5374 T: 961 1 974412 www.abraaj.com [email protected] www.dso.ae

38 MENA Private Equity and Venture Capital Report 07 39 MENA Private Equity and Venture Capital Report 07 Appendix Appendix

KAUST Malaz Capital ReAya Holding Waha Capital KAUST Innovation Fund Riyadh, KSA Jeddah, KSA Abu Dhabi, UAE 4700 King Abdullah University of Science & Suite 510, Al Akaria III, Olaya Street Suite 3007, 3rd floor Etihad Towers, Tower 3, Level 42 & 43 Technology T: +966 1 4601644 Kheriji Plaza, Madinah Road T: +971 2 667 7343 Thuwal 23955-6900 [email protected] T: +966 2 6676777 [email protected] Kingdom of Saudi Arabia www.malazcapital.com T: +966 2 6656333 www.wahacapital.ae www.kaust.edu.sa [email protected] 7.3 Private Equity and Venture Capital Morgan Lewis & Bockius www.reayaholding.com King & Spalding Firms in MENA Dubai, UAE Abu Dhabi, UAE (Excluding real estate and infrastructure funds.) Emirates Towers Offices, Office No. C, 10th Floor, Swicorp Level 15, Al Sila Tower, Abu Dhabi Global Market Sheikh Zayed Rd. Abraaj Group Square Riyadh, KSA T: +9714 3121800 Abu Dhabi Capital Management Kingdom Tower, 49th Floor, King Fahd Road T: +971 2 596 7000 Abu Dhabi Investment Company Dubai, UAE T: +966 11 211 0737 PineBridge Investments Middle East B.S.C (c) Abu Dhabi Investment House Al Fattan Currency House - Tower 2, Level 24 Dubai, UAE Manama, Bahrain Accelerator Technology Holdings T: +971 4 377 9900 DIFC, Al Fattan Currency House,Tower 2, Office 1502 GBCORP Tower, 13th floor Al Mal Capital Riyadh, KSA T: + 971 4 384 1600 Bahrain Financial Harbour District Al Mal Méditerranée Invest The Law Office of Mohammad Al-Ammar in affiliation Jeddah, KSA T : +973 17111888 Al Masah Capital Limited with King & Spalding LLP The Headquarters Business Park, 19th Floor, Corniche Alkhabeer Capital Kingdom Centre, 20th Floor- King Fahad Road www.pinebridge.com Road, Ash Shati Alternative Capital Partners T: +966 11 466 9400 Qatar First Bank TVM Capital Healthcare Partners Ltd. Amen Invest AmwalAlKhaleej Commercial Investment Company Lancor Capital Partners (LCP) Doha, Qatar DIFC Gate Village, Building 4 Ascent Group Dubai, UAE Suhaim Bin Hamad Street PO Box 113355, Dubai, UAE ATLAMED Corporate Investment Gate Village #3, Dubai International Financial Centre T : +974 4 483333 T +971 4 401 9568 Attijariwafa Bank T: +971 4 4019238 [email protected] www.tvm-capital.ae Auvest www.lancorcapital.com www.qfib.com.qa www.tvm-capital.com Azur Partners Bank Alkhair Beco Capital Beltone Private Equity Berytech 40 MENA Private Equity and Venture Capital Report 07 41 MENA Private Equity and Venture Capital Report 07 Appendix Appendix

Brookstone Partners Morocco GFH Capital Qalaa Holding Disclaimer: This publication is intended only to provide a summary of the subject matter covered. Cairo Financial Holding Global Capital Management Limited Qatar First Bank It does not purport to be comprehensive or to Capital Invest GroFin Advisory Reaya Holding render professional advice. No reader should act on the basis of any matter contained in this Capital Trust Gulf Capital Régional Gestion publication without first obtaining professional advice. CAPSA CAPITAL PARTNERS Havenvest Private Equity Middle East Limited Riva y Garcia Financial Group Catalyst Investment Management Company HBG Holdings Riyad Capital CDG Capital ICT Ventures Limited Sadara Ventures Cedar Bridge IdeaVelopers SAGES Capital CFG Capital Ikdam Gestion Samena Capital CI Capital Holding Company S.A.E. IMENA Saudi Technology Development and Investment Company Citadel Capital Intel Capital Sawari Ventures Compass Capital Investcorp Bank Sherpa Finance Club Concord International Investments Iris Capital SHUAA Capital Daman Investments Ithmar Capital Silicon Oasis Capital Delta Partners Itqan Capital Siraj Fund Management Company Eastgate Capital Group Jadwa Investment Sphinx Private Equity Management ECP Investments KAMCO Investment Company Swicorp EFG-Hermes Private Equity Kuwait Finance and Investment Company The National Investor Entreprises Partners Kuwait Financial Centre TIMAR Ventures General Partner Limited EuroMena FMC Limited Kuwait LBO Mgt Ltd Tuninvest Finance Group EVI Capital Partners Levant Capital Limited Tunisie Valeurs Evolvence Capital Malaz Capital TVM Capital MENA Fajr Capital Maxula Gestion United Gulf Financial Services North Africa Fenox Venture Capital MENA Infrastructure Upline Investments Fidelium Finance Middle East Broadcasting Corporation Venture Capital Bank FINACorp Middle East Venture Partners Vodafone Egypt Telecommunications Company S.A.E. Firogest MITC Capital WAHA Capital Food Services Management Mobily Ventures Wamda Foursan Group NBK Capital Limited Genero Capital Nile Capital 42 MENA Private Equity and Venture Capital Report

Dubai International Financial Center, Gate Village – Building #2, Level 3, Office 8 Dubai – United Arab Emirates