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