MENA Private Equity Fund


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MENA Private Equity Fund

  1. 1. Arab Private Equity Industry Prepared for the AVCA 5 th Conference in Kenya 6 – 9 November 2005
  2. 2. Agenda I. Who we are? II. Private Equity in the Arab World III. Private Equity in Egypt IV. Challenges
  3. 3. Who we are? I.
  4. 4. <ul><li>EFG-Hermes has 400+ employees, up from 30 in 1994 </li></ul><ul><li>Offices in Cairo, Dubai (2002) and Riyadh (2005) </li></ul><ul><li>Listed on the London and Cairo Stock Exchanges with a Market Cap of $1,053Mn (30.Oct.05) </li></ul><ul><li>Brokerage executed 40% of all transactions on CSE and UAE arm $211Mn in April alone </li></ul><ul><li>Investment Banking raised $ 4.1Bn in equity transactions and advised $ 11Bn M&A transactions </li></ul><ul><li>Asset Management manages 5 local and 3 off-shore funds with a total NAV of $ 750Mn </li></ul>Securities Brokerage Investment Banking Asset Management Private Equity EFG-Hermes Egypt’s Premier investment banking firm Structure Who we Are
  5. 5. Commercial International Investment Company 1994 US$ 189 Million EFG-Hermes US $ 54 Million EFG-Hermes Horus Private Equity Fund 1997 US $ 25 Million EFG-Hermes Middle East Technology Fund 2000 US$ 9 Million EFG-Hermes Technology Development Fund 2004 US $ 4.5 Million EFG-Hermes Jordan IT Fund 2000 Aggregate funds under managements US$ 543Mn (incl. US$ 61Mn proprietary investments) EFG-Hermes Private Equity 5 funds under management plus 2 closing in 2005 US $ 50 Million EFG-Hermes Horus Food & Agribusiness Fund 2005 US $ 155 Million EFG-Hermes Horus Private Equity Fund II 2005 Closing Closing
  6. 6. II. Private Equity in the Arab World
  7. 7. MENA Economic & Market Profile GDP $ 619Bn Market Cap (28.Oct.05) Market Cap $ 1,183Bn (192% of GDP) Roughly that of Spain
  8. 8. <ul><li>Drivers: oil prices & market deregulation </li></ul>MENA Stock Market Trends Significant growth in Regional Indices Source: Zawya, 29 October 2005 Non-GCC Countries Market Trends GCC Countries Market Trends Drivers: economic reform and corporate profits Abbreviations: ADI (Abu Dhabi), QSI (Qatar), MSI (Oman), SSI (Saudi Arabia), BAX (Bahrain), KUSI (Kuwait), MASI (Morocco), AMMAN (Jordan), HRMS (Egypt) and BLSI (Lebanon)
  9. 9. MENA Private Equity Regional PE 2005 Source: Private Equity Monitor, EHPE
  10. 10. Source: EHPE, Zawya, October 2005 MENA Private Equity Players Sample of funds raised or being raised in 2005 Note: Does not include Citadel, an Egyptian buyouts boutique 200 MENA Buyouts, with no sector focus Shuaa Partners SHUAA Partners Fund I, L.P. 2005 Investing 300 GCC Buyouts, in the IPO or Pre-IPO stages Global Investment House The Pre-IPO Fund 2005 Investing 300 MENA Buyouts, with no sector focus Abraaj Capital Buyout Fund II 2005 Investing 330 Kuwait Venture capital, early and late stages, in technology sector NTEC NTEC 2005 Investing 50 Egypt Buyouts, focus on agribusiness EHPE Horus Food & Agri 2005 Closing 150 Egypt Buyouts, with no sector focus Oasis Oasis 2005 Closed 155 Egypt Buyouts, with no sector focus EHPE Horus Private Equity II 2005 Closing 165 GCC Buyouts, focus on energy sector Markaz Markaz Energy Fund 2005 Fund Raising 272 Jordan Private Equity and Development projects Dubai International Capital Jordan Dubai Capital 2005 Fund Raising 300 GCC Buyouts in the energy sector GCC Energy Fund Managers Ltd GCC Energy Fund L.P. 2005 Announced Fund Size US$ Mn Country Investment Focus Fund Manager Fund name Date Status
  11. 11. <ul><li>Industry grew at 41% CAGR over past 5 years and projected to grow at 25% in next 3 years </li></ul><ul><li>$ 2.2Bn raised up to 2004 with > $ 3.4Bn raised or being raised in 2005 </li></ul>MENA Private Equity PE Industry Size $ 3.4Bn (< 1% of GDP) Source: Private Equity Monitor, EHPE
  12. 12. Source: EHPE, Zawya, October 2005 Profiles of MENA PE Funds 60 Funds (1/3 rd Buyouts by value and volume) Funds by investment focus
  13. 13. Source: EHPE, Zawya, October 2005 Fund focus (All funds before 2005) Fund focus 2005 Trends in MENA PE Funds More focused on Buyouts $ Mn $ Mn
  14. 14. Geographic Focus of Fund 2005 and 2006 PE Funds <ul><li>Shift in the geographic focus of funds. Prior to 2005, many funds were chasing opportunities in Levant and Egypt. </li></ul><ul><li>Today, the GCC and MENA, with its buyouts economies, is the focus of close to half of the funds being raised. </li></ul>
  15. 15. <ul><li>Median fund sizes increased from US$ 55Mn to US$ 150Mn </li></ul><ul><li>Evolution of Mega funds – NTEC US$ 330Mn, GCC Energy Fund US$ 300Mn </li></ul><ul><li>Investment range increased to attract bigger deal sizes </li></ul><ul><li>More focus on funds with buyout profiles </li></ul><ul><li>More focus on growth and late stage rather than seed, start ups, and SMEs </li></ul><ul><li>Targeting Pre-IPO and trade sale </li></ul><ul><li>Adopting int’l industry reporting & valuation standards </li></ul><ul><li>Technology funds are quickly losing attraction, while energy is gaining momentum </li></ul><ul><li>Shift in the geographic focus of funds </li></ul>MENA Private Equity Trends Wave of Funds being raised is different
  16. 16. Private Equity in Egypt III.
  17. 17. Private Equity fund raising trends Recession Recovery Boom Slowdown Recession Recovery State of the Economy Egypt Completed 1 st Cycle & going thru 2nd Private Equity riding the Cycle
  18. 18. Aggregate realizations 68 Aggregate proceeds US$ 504Mn (2000-2004) No. of realizations by sector Realizations routes Summary Egypt PE Exits EHPE Realizations (aggregate all funds)
  19. 19. Private Equity Players in Egypt 2005 PE Funds with buyout focus Note: Does not include Citadel, an Egyptian buyouts boutique
  20. 20. Private Equity in Egypt US$ 1.2 billion in funds under management (<1% of GDP) <ul><li>Egypt had 9 PE funds managing $ 650Mn up to year-end 2004 </li></ul><ul><li>In 2005, 5 new funds were established targeting $ 505Mn ($ 405Mn or 80% raised to date) </li></ul>US$ Mn Source: EHPE
  21. 21. <ul><li>10% of 2005 PE investments in Egypt are available for financing SMEs </li></ul><ul><li>Majority of the Egyptian business are SMEs </li></ul><ul><li>SMEs financing available totals $ 59Mn </li></ul><ul><li>Sector Specific IT ($ 9Mn) and Food and Agri ($ 50Mn) </li></ul>Egypt Private Equity Trends SMEs PE Financing
  22. 22. <ul><li>Median fund sizes increased from $ 50Mn to $ 100Mn </li></ul><ul><li>Investment range increased (Horus I ceiling $ 10Mn verses $ 30Mn Horus II) </li></ul><ul><li>Majority control less emphasis on controlled minority </li></ul><ul><li>Focus on recapitalization, turnarounds and privatizations </li></ul><ul><li>Growth and late stages with less on start ups and SMEs </li></ul><ul><li>Size important for potential IPO </li></ul><ul><li>Building management teams to implement value-added strategy </li></ul>Egypt Private Equity Trends Larger funds with buyout perspective
  23. 23. Challenges IV.
  24. 24. <ul><li>Lack of PE financing for SMEs and Startups </li></ul><ul><ul><li>Int’l institutions not interested & local institutions will participate only if they do </li></ul></ul><ul><ul><li>Difficult to exit </li></ul></ul><ul><li>Regulatory Environment </li></ul><ul><ul><li>Setting up local funds </li></ul></ul><ul><ul><li>Enforcing shareholder agreements </li></ul></ul><ul><ul><li>Codification of law </li></ul></ul><ul><ul><li>Foreign Ownership </li></ul></ul><ul><li>Due-diligence </li></ul><ul><ul><li>Law firms and Auditors are catching up to develop </li></ul></ul><ul><li>Human Capital </li></ul><ul><ul><li>PE requires a special reservoir of high caliber human capital </li></ul></ul><ul><li>Investment Support </li></ul><ul><ul><li>Lack of strong management to implement investment strategy </li></ul></ul><ul><li>Exit Mechanisms </li></ul><ul><ul><li>Volatile Capital Market in the region </li></ul></ul>Challenges facing PE Industry EHPE Experience in the Region
  25. 25. <ul><li>Encourage cooperation between members in terms of providing resources, tools, and ensuring the fair pricing and high quality of materials in such a transaction </li></ul><ul><li>Enhance deal flow between member companies </li></ul><ul><li>Encourage the exchange of information and experience between members </li></ul><ul><li>Increase opportunities for Cross-Country Investment </li></ul><ul><li>Bringing PE concerns to the attention of governments and private investors </li></ul><ul><li>Support for research, business information, economic feasibility studies, and statistics </li></ul><ul><li>Providing the means for contacting Arab and foreign research groups </li></ul><ul><li>Afford training, and knowledge for industry professionals on the technical, financial, legal aspects of Direct Investments as well as Venture Capital </li></ul><ul><li>Organizing conferences, workshops and networking opportunities </li></ul>Arab Private Equity Association APEA Core Mission
  26. 26. EFG-Hermes Private Equity 9 Mohamed Fahmy Street, 14 th Floor Garden City Cairo, Egypt. Tel: (202) 7923875/6/7 Fax: (202) Email: