Regional Perspective on
the Impact of Private
Equity and Future Outlook
March 19, 2007

Arif M. Naqvi
Vice Chairman & CEO
Private Equity Fund Distribution

Global private equity firms have historically ignored the region with the
MENA region on...
Private Equity Growth

With the influx of capital post 9/11 and high oil prices, the region is awash
with liquidity which ...
Private Equity Growth Drivers

Confluence of factors driving the regional growth of private equity

                  Requ...
Private Equity Growth Drivers
Unemployment is the single largest challenge for the region with the bulk
of reforms being i...
Private Equity Opportunities

Confluence of factors driving the regional sectoral growth

   Factors driving requirement f...
Private Equity Opportunities
Investment opportunities in the MENASA region cover the full spectrum of
infrastructure secto...
Private Equity Opportunities
Total announced projects spend requirement for the region


            Even with large budge...
Favourable Regulations
Gradual liberalization of regulations are conducive to economic growth,
yet more efforts are requir...
Private Equity Outlook
Investment opportunities for private equity growth

                                            Con...
Private Equity Outlook
Where the industry is headed

         More transparency
          – Reporting and disclosing info...
Private Equity Landscape
With c.59 firms in the Middle East there is more room for growth
         Tunisia:               ...
Abraaj Capital
Integrated Financial Services Provider

         Alternative Asset Management                              ...
Abraaj Capital
Investment Track Record
                               (in $ millions)
Funds
Invested



                  ...
Abraaj Capital

Abraaj and its affiliate companies currently employ 12,931 employees across
the MENASA region (excludes Ar...
Abraaj Capital

Asset management update                                                                                   ...
Abraaj Capital
Almost US$ 4 billion under management with a footprint across the
MENASA region, Abraaj in the last year ha...
Middle East Private Equity: Investing in Foresight




ABRAAJ CAPITAL, LEVEL 7, EMIRATES TOWER OFFICES, P.O.BOX 504905, DU...
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March 19, 2007 Regional Perspective on the Impact of Private ...

  1. 1. Regional Perspective on the Impact of Private Equity and Future Outlook March 19, 2007 Arif M. Naqvi Vice Chairman & CEO
  2. 2. Private Equity Fund Distribution Global private equity firms have historically ignored the region with the MENA region only accounting for 0.1% of the US$ 2.3 trillion* PE industry Regional PE industry as a % of total PE industry of US$ 2.2 trillion Europe 22.2% MENA Asia 0.1% 4.3% Americas 72.1% South Africa Asia 0.2% 0.3% Oceana 0.7% *US$ 400 billion of the global PE industry, including leverage represents a US$ 2 trillion in potential buying power Source: Thomson One Banker, Fortune Magazine 2
  3. 3. Private Equity Growth With the influx of capital post 9/11 and high oil prices, the region is awash with liquidity which in turn has led to a rise in private equity Total Funds Announced, Fund Raising, Investing and Rumored in MENA – 1994 onwards US$ million, 2002 – March 2007 24,511 20,861 3,650 14,435 20,861 6,426 4,520 6,426 1,096 1,047 49 1,906 2002 2005 2006 March 2007 Cumulative By year Note: Includes VC Source: Zawya 3
  4. 4. Private Equity Growth Drivers Confluence of factors driving the regional growth of private equity Required conditions for growth Regional Perspective  Stable political and economic  Exponential economic growth environment with the MENASA environment with sustainable growth as a whole growing at over 6% p.a. Macroeconomic prospects  Sufficient liquidity to drive growth with GCC countries sitting Conditions on US$ 398 billion of excess oil revenues  Improvement in regulatory infrastructure  Economic liberalization under way in a number of countries Regulatory & and shift in economic policies caused by (such as the emergence of numerous financial centres) Economic privatizations, globalization and efficient  Family businesses undergoing generational change Restructuring deployment of capital  Sectors such as retail, telecommunications, infrastructure  Implementation of WTO commitments opening up to foreign investment  HNWIs, financial institutions, and  Post 9/11 the appetite of local investors increasingly looking pension funds providing capital towards regional investment opportunities Availability of  Oil boom filtering throughout the MENASA region Capital  Availability of exit routes either through  Increasing IPO and M&A activity; regional stock market trade sales or IPOs correction a healthy phenomenon Exit mechanism  Governments moving into governance and out of management  New financial exchanges with global best practice standards such as DIFX emerging 4
  5. 5. Private Equity Growth Drivers Unemployment is the single largest challenge for the region with the bulk of reforms being implemented to address the issue Current & future MENA employment (million) 100.0 143.4 – 163.4 20.0 20.0 Overview Regional response Fastest growing labor Education population in the world 80.0 Privatization Region accounts for 5% of 63.4 143.4 global population Deregulation & Liberalization Transparency Current New Jobs Total Jobs Employment Required Note: Excludes Oman and Lebanon for which statistics were not available, as of October 2006 Source: Council on Foreign Relations, Abraaj analysis 5
  6. 6. Private Equity Opportunities Confluence of factors driving the regional sectoral growth Factors driving requirement for investment Population  Direct correlation between infrastructure requirements and population size growth  Need for additional job creation Economic  Economic growth could be stunted if hard and industrial infrastructure is growth ignored Economic  GCC governments in process of gradually reducing dependence on oil and gas diversification Comparative  Intrinsic value stemming from low energy and feedstock costs, abundant industrial natural resources and cheap labour advantage Demographic  Leading to increasing demand for education and healthcare services change Chronic under-  Low starting point investment Source: Abraaj analysis 6
  7. 7. Private Equity Opportunities Investment opportunities in the MENASA region cover the full spectrum of infrastructure sectors MENASA infrastructure investment requirements US$ billion 87 630 188 18 49 133 155 Power Water Healthcare Education Transportation Petrochemicals Total Source: Abraaj analysis 7
  8. 8. Private Equity Opportunities Total announced projects spend requirement for the region Even with large budget surpluses in the GCC for example, there is still a large deficit in required financing. GCC projects (US$ billion) The Saudi Arabian government requires investments of US$ 624 billion over the next 15 years 25 723 81 US$ 325 billion 32 113 of private investment required over 200 next 5 years 398 272 UAE Saudi Qatar Oman Kuwait Bahrain Total Excess Arabia Projects Oil Rev. Source: Abraaj analysis 8
  9. 9. Favourable Regulations Gradual liberalization of regulations are conducive to economic growth, yet more efforts are required to create a favorable environment Gradual liberalization of regulations and the impact on private equity firms Foreign ownership Customs duty Intellectual property rights Labour laws Dispute settlement Unfavorable Favorable Source: Abraaj analysis 9
  10. 10. Private Equity Outlook Investment opportunities for private equity growth Consolidation Management buyout Small/Medium Small/Medium Enterprises Enterprises (SMEs) (SMEs) Sector Partnerships liberalization Sector Family Groups Investment Liberalization/ / Expatriate Privatization Opportunities Business Privatization Divestments Infrastructure Infrastructure Finding gaps Source: Abraaj analysis 10
  11. 11. Private Equity Outlook Where the industry is headed  More transparency – Reporting and disclosing information have to be continually emphasized throughout the PE industry – Better communication of how PE firms create value is in the best interests of the PE industry  Better Corporate Governance – Good governance of a private equity firm facilitates the long-term success of the partnership. However, the inherent nature of the PE business tends to offer short-term temptations for less-than-good governance – To avoid short-sighted and short term actions a private equity firm must do what it pushes its own portfolio companies to do – Plan strategically in advance of crisis; seeking outside advice from experts  Best Practices – Formation of a regional governing body comprising of representatives from PE firms, regulators and other economic sectors across the region that will issue guidelines on best practices within the PE industry  Improved Legal Infrastructures – The private equity industry in the region has grown by leaps and bounds but still lacks depth due to uncertainty about rules and regulations – It is imperative that the legal platform be strengthened in order to serve as the backbone for the development of the industry for years to come; regulators need to focus on this industry 11
  12. 12. Private Equity Landscape With c.59 firms in the Middle East there is more room for growth Tunisia: Lebanon: Bahrain: UAE: 1. Tuninvest 1. Bader Lebanon 1. Abraaj Capital 1. Emerging Markets 2. Société Tunisienne 2. Byblos Bank Partnership 2. CERT Capital d'Investissement à 3. Capital Trust Group 2. Gulf Finance House 3. Daman Securities Capital Risque 4. Corporate Finance House 3. Kuwait Finance House 4. Dubai International Capital 5. Eagle Mngmnt 4. Unicorn Inv Bank 5. Estithmar Ventures Ltd 6. Fransa Bank 5. Venture Capital Bank 6. Evolvence Capital 7. Lebanon Invest Asset 7. Injazat Capital Mngmnt 8. Ithmar Capital 8. Middle East Capital Group 9. Shuaa Capital 9. MENA Advisors 10.Gulf Capital 11.Millennium Capital 12.The GCC Energy Fund Mngrs Turkey 13.The Group Morocco: 1. ATLAMED 14.The National Investor Tunisia 15.Abu Dhabi Future Energy Co. SA Lebanon Syria Morocco Iraq Jordan Iran Algeria Kuwait Pakistan Egypt: Libya Egypt Bahrain Pakistan: 1. Citadel Qatar Capital UAE India 1. Abraaj 2. Concord KSA Capital Investments Oman 2. Jahangir 3. EFG Hermes Bangladesh Siddiqui 4. Gulf Arab Investment Co. Kuwait: 5. Oasis Capital 1. Boubyan Bank 2. Global Investment House KSA: 3. Kamco Sri Lanka 1. Al Rajhi Banking & 4. Kuwait Financial Center Jordan: Invest Corp (Markaz) India: 1. Atlas Investment 2. Amwal Al Khaleej 5. Kuwait Petrochem Corp 1. Over 100 Group foreign PE 3. Athar Al Majid Hold. 6. National Tech Enterprises Co players 2. Catalyst Private 4. BMG Financial Advisors operating Equity 7. NBK Capital Qatar: 3. Foursan Group 5. Malaz Group 8. Noor Financial Inv Co 1. Qatar Capital 2. Abraaj Capital 6. Swicorp 9. Ryada Capital Partners 4. The Jordan Fund Source: Abraaj analysis, Zawya 12
  13. 13. Abraaj Capital Integrated Financial Services Provider Alternative Asset Management Investment Banking Commercial Banking Infrastructure Private Special Corporate Research & Asset Retail Corporate Real Estate & Growth Mortgage Equity Opportunities Finance Brokerage Management Banking Banking Capital ABOF AREF IGCF ASOF 25% Stake in EFG-Hermes US$116m US$114m US$ 2b US$33m US$ 500m MENA MENASA MENASA MENASA MENA 2002 2004 2006 2003 ABOF II ASOF II US$500m US$128m MENASA MENASA 2005 2005 SAIBF US$250m India 2006 ABPBF US$250m Pakistan 2006 US$ 3.9 billion under management* * Includes co-investments of US$ 156 million 13
  14. 14. Abraaj Capital Investment Track Record (in $ millions) Funds Invested 776 212 95 61 25 23 2002 2003 2004 2005 2006 1Q 2007 Aramex ONIC BMA JorAMCo Enshaa Air Arabia Amwal Septech Maktoob Signature Clubs Education sector Investments Spinneys Abanar MSF investment Arabtec Art Marine NAS Dead Sea Conf. Emirates Heights Dev. Serai Emirates Intl. Holding Ramky Twin Islands EFG-Hermes FMCG Manufacturing sector investment Oil & Gas Services sector investment Note: Includes co-investments and excludes ASOF investments 14
  15. 15. Abraaj Capital Abraaj and its affiliate companies currently employ 12,931 employees across the MENASA region (excludes Arabtec employees) Egypt Lebanon Pakistan UAE  EFG-Hermes  Spinneys Lebanon  BMA Pakistan  Abraaj Capital  Spinneys Egypt  1,300 employees  MSF  Septech  FMCG Manufacturing sector  Twin Islands  Arabtec* investment  1,059 employees  Art Marine  599 employees  Emirates Heights Development  Emirates International Holding  Enshaa  Signature Clubs  Serai  Air Arabia  Oil & Gas Services sector investment  Education sector investment  7,285 employees Jordan Saudi Arabia India  JorAMCo  NAS  Sabre Capital  Maktoob  700 employees  Ramky  Dead Sea Conference &  1,104 employees Resort  884 employees *Arabtec employees not included as over 28,000-30,000 at present Note: Distribution of companies across different countries is based on the location of their headquarters. Many of the above companies have pan-regional operations, and the employees across different countries have been included in the country where they are headquartered. 15
  16. 16. Abraaj Capital Asset management update 2006 37% Stake in Announced / closed 11 new investments totaling US$ 988 Investments million (2006-Present) FMCG Manufacturing $39 million Announced - 2007 2006 2006 2006 2006 25% Stake in 25% Stake in 30% Stake in 70% Stake in 80% Stake in Oil & Gas Education Services NAS MS Forgings $111 million $500 million $177 million $21 million $13 million 2007 2006 2006 2006 2006 8% Stake in Follow-on investment 80% Stake in 40% Stake in 17% Stake in Air Arabia $101 million $17 million $5 million $3.6 (of 20) million N/A Note: Amounts include co-investments 16
  17. 17. Abraaj Capital Almost US$ 4 billion under management with a footprint across the MENASA region, Abraaj in the last year has launched its country and sector specific funds Turkey Tunisia Syria Lebanon Morocco Iraq Jordan Iran Kuwait Pakistan Algeria Libya Egypt Bahrain Middle East Private Equity: Investing in Foresight Qatar UAE India KSA Oman Bangladesh Sri Lanka 17
  18. 18. Middle East Private Equity: Investing in Foresight ABRAAJ CAPITAL, LEVEL 7, EMIRATES TOWER OFFICES, P.O.BOX 504905, DUBAI, UNITED ARAB EMIRATES, TELEPHONE +9714 3191500 FACSIMILE +9714 3191600 E-MAIL info@abraaj.com www.abraaj.com
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