HarbourVest, Dubai firm tie-up for secondary private equity deals
HarbourVest Partners and Dubai-based private equity firm Lagoon Capital have teamed up to scout for secondary market private equity deals in the Middle East and North Africa.
Under the agreement, the two firms will jointly source, evaluate and invest in private equity assets held by investors from the MENA region, Lagoon said in a statement on Monday.
Expectations that banks would have to offload private equity stakes because of stricter capital rules, combined with a rise in demand for liquidity among other potential investors, has encouraged firms to launch vehicles to buy up such stakes.
However, secondary transactions - which typically involve the purchase of an existing asset from the current investor - have been rare in the Middle East and private equity firms have been forced to hold on to assets for longer than they might in more mature markets.
"While most people approach the investors in this region to raise capital, no one has really dug in to see what they have in terms of their private equity portfolios," Anuj Khanna, founder and chief executive officer of Lagoon said in an interview at the firm's office in Dubai's tax-free financial zone.
Secondary transactions can include purchases of commitments to existing funds, purchases of portfolios of operating companies, or more complex restructurings and spin-outs.
Lagoon, backed by Qatar Insurance Co, said the venture expects to deploy about $100-$150 million in the next 12-18 months with the main source of funding coming from Boston-based HarbourVest's Dover Street VIII fund, a secondary fund which raised $3.6 billion in July.
The Dubai-firm is also planning to launch a fund worth up to $150 million dedicated for secondary deals in the region and backed by its institutional investors in the first quarter of 2014, Khanna said.
"People feel it could be an attractive asset class. We've got some smart capital which is pushing us to advise on a fund which we will do," he said.
For the seller, a secondary sale is often viewed as a tool for achieving liquidity, rebalancing their portfolio, or addressing regulatory changes.
Khanna said Lagoon and HarborVest have already started looking for investment opportunities and have held discussions with potential sellers from the region.