The downturn is opening up lucrative opportunities in the Middle East for private equity firms, says Dr Omar bin Sulaiman, the governor of the Dubai International Financial Centre (DIFC). "Despite the global financial crisis, there is tremendous demand for infrastructure developments and an enormous level of wealth in private and government hands, which offers an opportunity for private equity firms in the Middle East," Dr bin Sulaiman, who is also the vice chairman of the Central Bank, told a private equity conference in Dubai. "At a time when banks are tight on lending and many regional company valuations have dropped, there will be a reliance on private equity in order to grow." This presented an opportunity for regional private equity firms to invest in companies with sound growth potential as they emerged from the downturn, he said. Arif Naqvi, the head of Abraaj Capital, the UAE's largest private equity house, echoed the positive outlook. "The private equity industry in the region will enter a phase where returns of the past few years will be dwarfed," the founder and chief executive told the conference. The Dubai-based firm, which has more than US$7.5 billion (Dh27.54bn) of assets under management, raised enough money last quarter to fund lucrative opportunities across the region. "We don't need to raise money; we raised $2.6bn in September and that's all we need now," Mr Naqvi told reporters on the sidelines of the conference. There were attractive deals in infrastructure and defensive sectors, including education and health care, he said."Going forward, one of the most exciting prospects will be in the real estate market, where prices have corrected and there are opportunities in distressed assets and yield-driven deals," said Mr Naqvi. Another area to consider was small and medium-sized enterprises, or SMEs. Mr Naqvi estimated that 80 per cent of the regional economy was dominated by SMEs. "This is where engines of economic growth will come from," he said. Dr bin Sulaiman said family businesses were among the best prospects for private equity firms as they sought exit strategies to capitalise on profits. "Private equity can play a primary role in helping family businesses restructure [business models] and create sustainable businesses that can succeed across generations," he said. "Private equity firms with liquidity have the advantage to clinch such deals." As equity markets remain shut, analysts say that private equity houses will receive more interest from family businesses looking to raise funds and grow in size. "Families are wiser now, looking for long-term guidance structures and mechanisms that will endure," said Sandy Shipton, the executive director of wealth management at the DIFC. There is still room for economic growth in the region owing to large oil revenues, despite current prices, according to Dr bin Sulaiman. The regional economy is due to slow to 3.9 per cent this year - down from previous forecasts last year of 5.8 per cent - before rebounding to 5.2 per cent next year, according to data from the IMF. Industry officials acknowledge that although lucrative opportunities exist for private equity firms with available funds, big challenges remain for the industry overall. "Those depending on easy capital will now find it difficult," said Dr bin Sulaiman. "Private equity firms will now rely less on leverage and focus more on growth capital." shamdan@thenational.ae
