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March 19, 2007

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Source: Thomson One Banker, Fortune Magazine. 3 ... ABRAAJ CAPITAL, LEVEL 7, EMIRATES TOWER OFFICES, P.O.BOX 504905, DUBAI, UNITED ARAB EMIRATES, ... – PowerPoint PPT presentation

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Title: March 19, 2007


1
Regional Perspective on the Impact of Private
Equity and Future Outlook
March 19, 2007
Arif M. Naqvi Vice Chairman CEO
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
Europe 22.2
Asia 4.3
MENA 0.1
Americas 72.1
South Asia 0.3
Africa 0.2
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
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
Note Includes VC Source Zawya
4
Private Equity Growth Drivers
Confluence of factors driving the regional growth
of private equity
Regional Perspective
Required conditions for growth
Macroeconomic Conditions
  • Stable political and economic environment with
    sustainable growth prospects
  • Exponential economic growth environment with the
    MENASA as a whole growing at over 6 p.a.
  • Sufficient liquidity to drive growth with GCC
    countries sitting on US 398 billion of excess
    oil revenues

Regulatory Economic Restructuring
  • Improvement in regulatory infrastructure and
    shift in economic policies caused by
    privatizations, globalization and efficient
    deployment of capital
  • Implementation of WTO commitments
  • Economic liberalization under way in a number of
    countries (such as the emergence of numerous
    financial centres)
  • Family businesses undergoing generational change
  • Sectors such as retail, telecommunications,
    infrastructure opening up to foreign investment

Availability of Capital
  • HNWIs, financial institutions, and pension funds
    providing capital
  • Post 9/11 the appetite of local investors
    increasingly looking towards regional investment
    opportunities
  • Oil boom filtering throughout the MENASA region

Exit mechanism
  • Availability of exit routes either through trade
    sales or IPOs
  • Increasing IPO and MA activity regional stock
    market correction a healthy phenomenon
  • Governments moving into governance and out of
    management
  • New financial exchanges with global best practice
    standards such as DIFX emerging

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
Overview
Fastest growing labor population in the
world Region accounts for 5 of global population
Education Privatization Deregulation
Liberalization Transparency
Note Excludes Oman and Lebanon for which
statistics were not available, as of October
2006 Source Council on Foreign Relations, Abraaj
analysis
6
Private Equity Opportunities
Confluence of factors driving the regional
sectoral growth
Population growth
  • Direct correlation between infrastructure
    requirements and population size
  • Need for additional job creation

Economic growth
  • Economic growth could be stunted if hard and
    industrial infrastructure is ignored

Economic diversification
  • GCC governments in process of gradually reducing
    dependence on oil and gas

Comparative industrial advantage
  • Intrinsic value stemming from low energy and
    feedstock costs, abundant natural resources and
    cheap labour

Demographic change
  • Leading to increasing demand for education and
    healthcare services

Chronic under-investment
  • Low starting point

Source Abraaj analysis
7
Private Equity Opportunities
Investment opportunities in the MENASA region
cover the full spectrum of infrastructure sectors
Source Abraaj analysis
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
US 325 billion of private investment required
over next 5 years
Source Abraaj analysis
9
Favourable Regulations
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
10
Private Equity Outlook
Investment opportunities for private equity
growth
Consolidation
Management buyout
Small/Medium Enterprises (SMEs)
Small/Medium Enterprises (SMEs)
Sector liberalization
Partnerships
Sector Liberalization/ Privatization
Family Groups / Expatriate Business
Family Groups / Expatriate Business
Sector Liberalization/ Privatization
Privatization
Divestments
Infrastructure
Infrastructure
Finding gaps
Source Abraaj analysis
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

12
Private Equity Landscape
With c.59 firms in the Middle East there is more
room for growth
  • Lebanon
  • Bader Lebanon
  • Byblos Bank
  • Capital Trust Group
  • Corporate Finance House
  • Eagle Mngmnt
  • Fransa Bank
  • Lebanon Invest Asset Mngmnt
  • Middle East Capital Group
  • MENA Advisors
  • UAE
  • Abraaj Capital
  • CERT Capital
  • Daman Securities
  • Dubai International Capital
  • Estithmar Ventures Ltd
  • Evolvence Capital
  • Injazat Capital
  • Ithmar Capital
  • Shuaa Capital
  • Gulf Capital
  • Millennium Capital
  • The GCC Energy Fund Mngrs
  • The Group
  • The National Investor
  • Abu Dhabi Future Energy Co.
  • Tunisia
  • Tuninvest
  • Société Tunisienne d'Investissement à Capital
    Risque
  • Bahrain
  • Emerging Markets Partnership
  • Gulf Finance House
  • Kuwait Finance House
  • Unicorn Inv Bank
  • Venture Capital Bank
  • Morocco
  • ATLAMED SA
  • Egypt
  • Citadel Capital
  • Concord Investments
  • EFG Hermes
  • Gulf Arab Investment Co.
  • Oasis Capital
  • Pakistan
  • Abraaj Capital
  • Jahangir Siddiqui
  • Kuwait
  • Boubyan Bank
  • Global Investment House
  • Kamco
  • Kuwait Financial Center (Markaz)
  • Kuwait Petrochem Corp
  • National Tech Enterprises Co
  • NBK Capital
  • Noor Financial Inv Co
  • Ryada Capital
  • KSA
  • Al Rajhi Banking Invest Corp
  • Amwal Al Khaleej
  • Athar Al Majid Hold.
  • BMG Financial Advisors
  • Malaz Group
  • Swicorp
  • Jordan
  • Atlas Investment Group
  • Catalyst Private Equity
  • Foursan Group
  • The Jordan Fund
  • India
  • Over 100 foreign PE players operating
  • Abraaj Capital
  • Qatar
  • Qatar Capital Partners

Source Abraaj analysis, Zawya
13
Abraaj Capital
Integrated Financial Services Provider
Alternative Asset Management
Investment Banking
Commercial Banking
Private Equity
Real Estate
Special Opportunities
Infrastructure Growth Capital
Corporate Finance
Research Brokerage
Asset Management
Retail Banking
Corporate Banking
Mortgage
ABOF US116m MENA 2002
ASOF US33m MENASA 2003
  • 25 Stake in EFG-Hermes
  • US 500m
  • MENA

AREF US114m MENASA 2004
IGCF US 2b MENASA 2006
ABOF II US500m MENASA 2005
ASOF II US128m MENASA 2005
SAIBF US250m India 2006
ABPBF US250m Pakistan 2006
US 3.9 billion under management
Includes co-investments of US 156 million
14
Abraaj Capital
Investment Track Record
(in millions)
Funds Invested
Aramex
ONIC Amwal
BMA Septech Spinneys Arabtec Dead Sea Conf.
JorAMCo Maktoob Abanar Art Marine Emirates
Heights Dev. Emirates Intl. Holding Twin Islands
Enshaa Signature Clubs MSF NAS Serai Ramky EFG-Her
mes FMCG Manufacturing sector investment Oil
Gas Services sector investment
Air Arabia Education sector investment
Investments
Note Includes co-investments and excludes ASOF
investments
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.
16
Abraaj Capital
Asset management update
Investments
Announced / closed 11 new investments totaling
US 988 million (2006-Present)
Note Amounts include co-investments
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
Middle East Private Equity Investing in Foresight
18
Middle East Private Equity Investing in
Foresight
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