Investors have been setting up shop in the Middle East at a remarkable clip, drawn to both deep wells of investment capital and a surprisingly resilient PE industry.
At the start of 2023, French PE firm Ardian opened an Abu Dhabi office after forming a partnership with Mubadala. Then in July, its Paris-listed peer Tikehau Capital also opened offices in the capital. They were followed by US asset manager Blue Owl in September, which simultaneously launched a joint venture with Abu Dhabi-based asset manager Lunate.
In November, General Atlantic opened offices in the UAE and Saudi Arabia, while HIG Capital—which already has significant European operations—opened a Dubai office in January. Others that opened offices in recent years include Luxembourg’s CVC Capital Partners in 2021 and Brookfield Asset Management in 2022.
The reasons why fund managers want to have boots on the ground have been fairly well documented. As noted in PitchBook’s new H2 2023 MENA Private Capital Breakdown, the region’s oil-rich economies have amassed huge amounts of wealth over the years that have been deposited in large sovereign wealth funds. These funds are now being used to reduce the region’s dependence on finite mineral wealth by diversifying into other assets like infrastructure, technology and various alternative investment strategies offered by private fund managers.
As well as being a source of capital, the region’s emergent economies have been a source of deal flow as the PE industry matures. The report shows how the market has managed to defy many macroeconomic and geopolitical headwinds. In 2023, total PE deal value was up 21.2% from the previous year to $15.7 billion, and the deal count grew 1.4% to 146. Some of the largest deals have included the overseas investors establishing themselves in the region, such as Brookfields’ $2.7 billion take private of UAE-based financial payments provider Network International in April.
It is still early days for the region. Specifically, our report notes an ongoing and significant dependence on sovereign-linked capital sources. However, the market is maturing, and further migration to the region’s capital center by overseas investors is likely to promote further inward and outward investment in MENA.
Featured image of Riyadh, Saudi Arabia, by @ Didier Marti/Getty Images
