Still meager private equity investments in Middle East markets- report

February 17
1:34 PM 2014

A lot has been expected from the private equity market in the Middle East for the past decade but investments have remained few and far between, Financial News reported. Citing data from Dealogic, the report said 2013 saw less than a quarter of the deal volume posted in 2006 which amounted to £3.2 billion.

In last year's thesis entitled "The Arab Spring and Private Equity: Time to Take the Plunge?" academics at The Wharton School of the University of Pennsylvania seem to believe that the conditions in the region were right for a revival in private equity activity. The authors believe that the decline of the decline of the autocratic states would fuel reforms in the economic and political scene that could make the region more private equity-friendly, the report said.

In a Deloitte survey, managers in the region still placed their long-term confidence in the region at 7.4 out of 10. Even if this was a Iittle bit below the 2012 score of 8, it still signified that they were still positive about the region's prospects, the report said.

However, as the Middle East and North Africa regions goes farther down the investors' priority list and capital continues to decrease, the positivity may increasingly become unfounded. One of the reasons for this is because the political troubles in Egypt and Syria's civil war have labeled the image of more established countries as high-risk. Another reason is because emerging markets offer better prospects for growth, the report said.

Private equity buyers are staying clear of countries that have turned into political hotbeds even if they were once viewed as economic hot spots. Egypt made up 50% of the region's activity in 2007. However, Dealogic data showed that from a private equity investment peak of $1.7 billion, the investment in the region's largest country has plunged to only $102 million in 2013, the report said.

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