Investcorp and Dubai Investments seek to cash in on year of $20bn deals

The Bahrain investment house that once owned Gucci is coming to Abu Dhabi as buyout companies ride a US$20 billion tide of deal-making.

Investcorp yesterday disclosed it had bought a controlling stake in Hydrasun, an oil and gas services company based in the United Kingdom. Ed Andrieski / AP Photo

The Bahrain investment house that once owned Gucci is coming to Abu Dhabi as buyout companies ride a US$20 billion (Dh73.46bn) tide of deal-making.

Manama-listed Investcorp and the UAE’s Dubai Investments are among the regional groups seeking to benefit from rising demand for alternative investments as low interest rates, falling bond yields and volatile equity markets drive the search for better returns.

“There is a lot of private money coming in, and it is being driven by interest rates,” said Khalid bin Kalban, the chief executive of Dubai Investments.

“Private equity firms are buying with the view that the market is trending positively. The liquidity is available.”

Investcorp yesterday disclosed it had bought a controlling stake in Hydrasun, an oil and gas services company based in the United Kingdom, the latest in a string of acquisitions made over the past year.

It comes as the alternative investment manager seeks to boost its regional footprint with office openings planned for both Abu Dhabi and Doha. It has also opened an office in Riyadh.

The region’s previously subdued buyout industry is experiencing a renewed rush of activity as business confidence grows and deal activity increases. Abraaj Capital this month was said to be considering the sale of its controlling stake in Spinneys, Bloomberg reported. Gulf Capital also this month said it had bought a 51 per cent stake in OCB Oil Services, a rig crew supplier based in Dubai.

Mergers and acquisitions with Middle East targets reached $20bn last year – double the activity of a year earlier according to Thomson Reuters data.

It said the UK was the most popular target for outbound Middle Eastern mergers and acquisitions transactions, followed by Brazil and India.

“There are certainly more deals being looked at. We have seen more momentum in the last six months,” said Vikas Papriwal, the regional head of sovereign wealth funds and private equity at KPMG.

“The biggest problem with the private equity industry has been uncertain market baselines. Now that valuations are stabilised and repeating themselves quarter on quarter, investors are getting more comfortable.”

Investcorp's move to open regional offices also reflects increased interest from Arabian Gulf investors in alternative investments.
"We want to cater to our clients and be regulated in their markets," said Mohammed Al Shroogi, the president for Arabian Gulf business at Investcorp.

But the move may not indicate an increased appetite for regional investments or discounted assets from Arab Spring countries. While other Gulf corporations have been quick to buy up attractively priced companies in countries such as Egypt, Investcorp has avoided economies hit by political upheaval.

“We have taken a business decision not to invest because of the unrest,” Mr Shroogi said. “Maybe in the future when things settle. We don’t go there for political reasons, we are there if it makes economic sense.”

Investcorp declined to disclose the value of the Hydrasun transaction or the size of the stake in the company, which employs 600 people across Europe, the Middle East, Africa and South America.

Investcorp has made $1.5bn worth of acquisitions in the past year as it recycles the proceeds of about $2.5bn in investment exits made over the past two years.