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Downturn Brings Investment Opportunities in ME: Bin Sulaiman

Dr. Bin Sulaiman said that at a time when banks are tight on lending, many regional firms whose valuations have dropped will be relying on private equity to grow.

This presents openings for regional private equity firms to invest in companies that have sound growth potential as they emerge from the downturn.

“Despite the global financial crisis, there is tremendous demand for infrastructure developments, and the enormous levels of wealth in both private and government hands offer opportunities for private equity firms in the region,” Dr. Bin Sulaiman said at a private equity forum on Tuesday.

He said that the region is in a far better position than other parts of the world. While the developed world is in recession, emerging markets, including the Middle East, are still expected to grow.

According to World Bank forecasts, the economic growth rate for the Middle East and North Africa will slow to 3.9 per cent in 2009 from an estimated 5.8 per cent in 2008, but then rebound to 5.2 per cent in 2010.

Dr. Bin Sulaiman believes that some of the most exciting opportunities for private equity lie in the family business sector.

Over the next two years, many family business groups are likely to seek exit strategies to monetise the assets they have created over the years. Furthermore, succession challenges in these family-owned firms present opportunities for private equity firms.

“Private equity can truly play a vital role in helping family businesses restructure and reposition themselves and become more fully institutionalised. Private equity can assist family-run organisations in creating sustainable businesses that can succeed across generations,” he said.

More than 90 per cent of all commercial activities in the Middle East and North Africa region are controlled by family-owned businesses.

Member countries of the Gulf Cooperation Council have more than 5,000 such businesses, which have combined assets of over $50 billion and employ around 70 per cent of the workforce.

Unlike in developed markets, the Middle East’s private equity industry relies less on highly leveraged deals and is more oriented towards investing for long-term growth.

“Many regional equity funds have focused on the fundamental profitability and growth of the companies they invest in,”Dr. Bin Sulaiman said.

“Such firms are well positioned to benefit from opportunities that exist in our region even during these times of the global financial crisis.”

abdulbasit@khaleejtimes.com