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March 19, 2007 Regional Perspective on the Impact of Private Equity and Future Outlook Arif M. Naqvi Vice Chairman & CEO
Global private equity firms have historically ignored the region with the MENA region only accounting for 0.1% of the US$ ...
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 ri...
Macroeconomic Conditions <ul><li>Stable political and economic environment with sustainable growth prospects </li></ul><ul...
Note: Excludes Oman and Lebanon for which statistics were not available, as of October 2006 Source: Council on Foreign Rel...
Population growth <ul><li>Direct correlation between infrastructure requirements and population size </li></ul><ul><li>Nee...
Investment opportunities in the MENASA region cover the full spectrum of infrastructure sectors Private Equity Opportuniti...
US$ 325 billion of private investment required over next 5 years Even with large budget surpluses in the GCC for example, ...
Gradual liberalization of regulations are conducive to economic growth, yet more efforts are required to create a favorabl...
Sector Liberalization/ Privatization Infrastructure Family Groups / Expatriate Business Small/Medium Enterprises  (SMEs) P...
Private Equity Outlook Where the industry is headed <ul><li>More transparency </li></ul><ul><ul><li>Reporting and disclosi...
<ul><li>Lebanon: </li></ul><ul><li>Bader Lebanon </li></ul><ul><li>Byblos Bank </li></ul><ul><li>Capital Trust Group </li>...
Abraaj Capital Private Equity Real Estate Special Opportunities Infrastructure & Growth Capital Corporate Finance  Researc...
Abraaj Capital Aramex ONIC Amwal BMA Septech Spinneys Arabtec Dead Sea Conf. JorAMCo Maktoob Abanar Art Marine Emirates He...
Abraaj Capital Abraaj and its affiliate companies currently employ 12,931 employees across the MENASA region (excludes Ara...
Abraaj Capital  Investments Announced / closed 11 new investments  totaling US$ 988 million (2006-Present) Note: Amounts i...
Almost US$ 4 billion under management with a footprint across the MENASA region, Abraaj in the last year has launched its ...
Middle East Private Equity: Investing in Foresight www.abraaj.com TELEPHONE  +9714 3191500   FACSIMILE  +9714 3191600   E-...
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  1. 1. March 19, 2007 Regional Perspective on the Impact of Private Equity and Future Outlook Arif M. Naqvi Vice Chairman & CEO
  2. 2. 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 Private Equity Fund Distribution Americas 72.1% Europe 22.2% Asia 4.3% Oceana 0.7% South Asia 0.3% MENA 0.1% Africa 0.2% *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 Regional PE industry as a % of total PE industry of US$ 2.2 trillion
  3. 3. 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 Note: Includes VC Source: Zawya Private Equity Growth Total Funds Announced, Fund Raising, Investing and Rumored in MENA – 1994 onwards US$ million, 2002 – March 2007 1,096 6,426 20,861 24,511
  4. 4. Macroeconomic Conditions <ul><li>Stable political and economic environment with sustainable growth prospects </li></ul><ul><li>Exponential economic growth environment with the MENASA as a whole growing at over 6% p.a. </li></ul><ul><li>Sufficient liquidity to drive growth with GCC countries sitting on US$ 398 billion of excess oil revenues </li></ul>Regional Perspective Regulatory & Economic Restructuring <ul><li>Improvement in regulatory infrastructure and shift in economic policies caused by privatizations, globalization and efficient deployment of capital </li></ul><ul><li>Implementation of WTO commitments </li></ul><ul><li>Economic liberalization under way in a number of countries (such as the emergence of numerous financial centres) </li></ul><ul><li>Family businesses undergoing generational change </li></ul><ul><li>Sectors such as retail, telecommunications, infrastructure opening up to foreign investment </li></ul>Availability of Capital <ul><li>HNWIs, financial institutions, and pension funds providing capital </li></ul><ul><li>Post 9/11 the appetite of local investors increasingly looking towards regional investment opportunities </li></ul><ul><li>Oil boom filtering throughout the MENASA region </li></ul>Exit mechanism <ul><li>Availability of exit routes either through trade sales or IPOs </li></ul><ul><li>Increasing IPO and M&A activity; regional stock market correction a healthy phenomenon </li></ul><ul><li>Governments moving into governance and out of management </li></ul><ul><li>New financial exchanges with global best practice standards such as DIFX emerging </li></ul>Private Equity Growth Drivers Confluence of factors driving the regional growth of private equity Required conditions for growth
  5. 5. Note: Excludes Oman and Lebanon for which statistics were not available, as of October 2006 Source: Council on Foreign Relations, Abraaj analysis Overview Fastest growing labor population in the world Region accounts for 5% of global population Private Equity Growth Drivers Unemployment is the single largest challenge for the region with the bulk of reforms being implemented to address the issue Education Privatization Deregulation & Liberalization Transparency Current & future MENA employment (million) Regional response 100.0 143.4 – 163.4
  6. 6. Population growth <ul><li>Direct correlation between infrastructure requirements and population size </li></ul><ul><li>Need for additional job creation </li></ul>Economic growth <ul><li>Economic growth could be stunted if hard and industrial infrastructure is ignored </li></ul>Economic diversification <ul><li>GCC governments in process of gradually reducing dependence on oil and gas </li></ul>Comparative industrial advantage <ul><li>Intrinsic value stemming from low energy and feedstock costs, abundant natural resources and cheap labour </li></ul>Demographic change <ul><li>Leading to increasing demand for education and healthcare services </li></ul>Chronic under-investment <ul><li>Low starting point </li></ul>Confluence of factors driving the regional sectoral growth Private Equity Opportunities Source: Abraaj analysis Factors driving requirement for investment
  7. 7. Investment opportunities in the MENASA region cover the full spectrum of infrastructure sectors Private Equity Opportunities Source: Abraaj analysis MENASA infrastructure investment requirements US$ billion
  8. 8. US$ 325 billion of private investment required over next 5 years 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 Total announced projects spend requirement for the region Private Equity Opportunities Source: Abraaj analysis
  9. 9. Gradual liberalization of regulations are conducive to economic growth, yet more efforts are required to create a favorable environment Foreign ownership Customs duty Intellectual property rights Labour laws Dispute settlement Source: Abraaj analysis Favourable Regulations Unfavorable Favorable Gradual liberalization of regulations and the impact on private equity firms
  10. 10. Sector Liberalization/ Privatization Infrastructure Family Groups / Expatriate Business Small/Medium Enterprises (SMEs) Private Equity Outlook Investment opportunities for private equity growth Family Groups / Expatriate Business Sector Liberalization/ Privatization Small/Medium Enterprises (SMEs) Infrastructure Finding gaps Privatization Sector liberalization Divestments Partnerships Consolidation Management buyout Source: Abraaj analysis Investment Opportunities
  11. 11. Private Equity Outlook Where the industry is headed <ul><li>More transparency </li></ul><ul><ul><li>Reporting and disclosing information have to be continually emphasized throughout the PE industry </li></ul></ul><ul><ul><li>Better communication of how PE firms create value is in the best interests of the PE industry </li></ul></ul><ul><li>Better Corporate Governance </li></ul><ul><ul><li>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 </li></ul></ul><ul><ul><li>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 </li></ul></ul><ul><li>Best Practices </li></ul><ul><ul><li>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 </li></ul></ul><ul><li>Improved Legal Infrastructures </li></ul><ul><ul><li>The private equity industry in the region has grown by leaps and bounds but still lacks depth due to uncertainty about rules and regulations </li></ul></ul><ul><ul><li>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 </li></ul></ul>
  12. 12. <ul><li>Lebanon: </li></ul><ul><li>Bader Lebanon </li></ul><ul><li>Byblos Bank </li></ul><ul><li>Capital Trust Group </li></ul><ul><li>Corporate Finance House </li></ul><ul><li>Eagle Mngmnt </li></ul><ul><li>Fransa Bank </li></ul><ul><li>Lebanon Invest Asset Mngmnt </li></ul><ul><li>Middle East Capital Group </li></ul><ul><li>MENA Advisors </li></ul><ul><li>UAE: </li></ul><ul><li>Abraaj Capital </li></ul><ul><li>CERT Capital </li></ul><ul><li>Daman Securities </li></ul><ul><li>Dubai International Capital </li></ul><ul><li>Estithmar Ventures Ltd </li></ul><ul><li>Evolvence Capital </li></ul><ul><li>Injazat Capital </li></ul><ul><li>Ithmar Capital </li></ul><ul><li>Shuaa Capital </li></ul><ul><li>Gulf Capital </li></ul><ul><li>Millennium Capital </li></ul><ul><li>The GCC Energy Fund Mngrs </li></ul><ul><li>The Group </li></ul><ul><li>The National Investor </li></ul><ul><li>Abu Dhabi Future Energy Co. </li></ul><ul><li>Tunisia: </li></ul><ul><li>Tuninvest </li></ul><ul><li>Société Tunisienne d'Investissement à Capital Risque </li></ul><ul><li>Egypt: </li></ul><ul><li>Citadel Capital </li></ul><ul><li>Concord Investments </li></ul><ul><li>EFG Hermes </li></ul><ul><li>Gulf Arab Investment Co. </li></ul><ul><li>Oasis Capital </li></ul><ul><li>Jordan: </li></ul><ul><li>Atlas Investment Group </li></ul><ul><li>Catalyst Private Equity </li></ul><ul><li>Foursan Group </li></ul><ul><li>The Jordan Fund </li></ul><ul><li>Kuwait: </li></ul><ul><li>Boubyan Bank </li></ul><ul><li>Global Investment House </li></ul><ul><li>Kamco </li></ul><ul><li>Kuwait Financial Center (Markaz) </li></ul><ul><li>Kuwait Petrochem Corp </li></ul><ul><li>National Tech Enterprises Co </li></ul><ul><li>NBK Capital </li></ul><ul><li>Noor Financial Inv Co </li></ul><ul><li>Ryada Capital </li></ul><ul><li>Bahrain: </li></ul><ul><li>Emerging Markets Partnership </li></ul><ul><li>Gulf Finance House </li></ul><ul><li>Kuwait Finance House </li></ul><ul><li>Unicorn Inv Bank </li></ul><ul><li>Venture Capital Bank </li></ul><ul><li>India: </li></ul><ul><li>Over 100 foreign PE players operating </li></ul><ul><li>Abraaj Capital </li></ul><ul><li>Morocco: </li></ul><ul><li>ATLAMED SA </li></ul><ul><li>Pakistan: </li></ul><ul><li>Abraaj Capital </li></ul><ul><li>Jahangir Siddiqui </li></ul><ul><li>KSA: </li></ul><ul><li>Al Rajhi Banking & Invest Corp </li></ul><ul><li>Amwal Al Khaleej </li></ul><ul><li>Athar Al Majid Hold. </li></ul><ul><li>BMG Financial Advisors </li></ul><ul><li>Malaz Group </li></ul><ul><li>Swicorp </li></ul><ul><li>Qatar: </li></ul><ul><li>Qatar Capital Partners </li></ul>Private Equity Landscape With c.59 firms in the Middle East there is more room for growth Source: Abraaj analysis, Zawya Oman UAE KSA India Pakistan Kuwait Bahrain Egypt Lebanon Turkey Iran Iraq Libya Algeria Tunisia Morocco Syria Jordan Sri Lanka Bangladesh Qatar
  13. 13. Abraaj Capital Private Equity Real Estate Special Opportunities Infrastructure & Growth Capital Corporate Finance Research & Brokerage Asset Management ABOF US$116m MENA 2002 ABOF II US$500m MENASA 2005 ASOF US$33m MENASA 2003 <ul><li>25% Stake in EFG-Hermes </li></ul><ul><li>US$ 500m </li></ul><ul><li>MENA </li></ul>US$ 3.9 billion under management* SAIBF US$250m India 2006 ABPBF US$250m Pakistan 2006 Alternative Asset Management Investment Banking Commercial Banking AREF US$114m MENASA 2004 ASOF II US$128m MENASA 2005 IGCF US$ 2b MENASA 2006 * Includes co-investments of US$ 156 million Retail Banking Corporate Banking Mortgage Integrated Financial Services Provider
  14. 14. Abraaj Capital Aramex ONIC Amwal BMA Septech Spinneys Arabtec Dead Sea Conf. JorAMCo Maktoob Abanar Art Marine Emirates Heights Dev. Emirates Intl. Holding Twin Islands Investments Funds Invested Enshaa Signature Clubs MSF NAS Serai Ramky EFG-Hermes FMCG Manufacturing sector investment Oil & Gas Services sector investment (in $ millions) Air Arabia Education sector investment Note: Includes co-investments and excludes ASOF investments Investment Track Record
  15. 15. Abraaj Capital Abraaj and its affiliate companies currently employ 12,931 employees across the MENASA region (excludes Arabtec 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. Egypt <ul><li>EFG-Hermes </li></ul><ul><li>Spinneys Egypt </li></ul><ul><li>FMCG Manufacturing sector investment </li></ul><ul><li>599 employees </li></ul><ul><li>Spinneys Lebanon </li></ul><ul><li>1,300 employees </li></ul>Lebanon UAE <ul><li>Abraaj Capital </li></ul><ul><li>Septech </li></ul><ul><li>Arabtec* </li></ul><ul><li>Art Marine </li></ul><ul><li>Emirates Heights Development </li></ul><ul><li>Emirates International Holding </li></ul><ul><li>Enshaa </li></ul><ul><li>Signature Clubs </li></ul><ul><li>Serai </li></ul><ul><li>Air Arabia </li></ul><ul><li>Oil & Gas Services sector investment </li></ul><ul><li>Education sector investment </li></ul><ul><li>7,285 employees </li></ul><ul><li>Sabre Capital </li></ul><ul><li>Ramky </li></ul><ul><li>1,104 employees </li></ul>India <ul><li>BMA Pakistan </li></ul><ul><li>MSF </li></ul><ul><li>Twin Islands </li></ul><ul><li>1,059 employees </li></ul>Pakistan Jordan <ul><li>JorAMCo </li></ul><ul><li>Maktoob </li></ul><ul><li>Dead Sea Conference & Resort </li></ul><ul><li>884 employees </li></ul>Saudi Arabia <ul><li>NAS </li></ul><ul><li>700 employees </li></ul>
  16. 16. Abraaj Capital Investments Announced / closed 11 new investments totaling US$ 988 million (2006-Present) Note: Amounts include co-investments Asset management update 2006 2006 2006 2006 2006 NAS 2007 Air Arabia 2006 2006 MS Forgings Announced - 2007 Education 2006 Oil & Gas Services 2006 FMCG Manufacturing
  17. 17. 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 Abraaj Capital Middle East Private Equity: Investing in Foresight KSA India Pakistan Oman UAE Kuwait Bahrain Egypt Lebanon Turkey Iran Iraq Libya Algeria Tunisia Morocco Syria Jordan Sri Lanka Bangladesh Qatar
  18. 18. Middle East Private Equity: Investing in Foresight www.abraaj.com TELEPHONE +9714 3191500 FACSIMILE +9714 3191600 E-MAIL [email_address] ABRAAJ CAPITAL, LEVEL 7, EMIRATES TOWER OFFICES, P.O.BOX 504905, DUBAI, UNITED ARAB EMIRATES,
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