Private equity will be a key driver of post-crisis Middle East economic recovery

Alternative debt funds will be crucial to supporting funding gaps in Middle East markets – particularly for the small and medium-sized enterprises and mid-market enterprises, which represent a significant part of the region’s non-oil economy, experts said.

Although the level of deal flow in 2020 has been similar to pre-crisis levels, the types of transactions and the reason for them have differed, according to panellists at a recent ICAEW (the Institute of Chartered Accountants in England and Wales) webinar on fast tracking mergers and acquisitions (M&A) in the Middle East.

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Discussions centred on how corporate finance is shaping capital raising, driving transactions and supporting business transformation to help economies adapt during and beyond the coronavirus pandemic.

The speakers indicated that the COVID-19 pandemic has impacted deals significantly, and the business environment and willingness of international investors to do business in the region has changed due to uncertainty in the market and recent high-profile scandals.

International investors are still interested in venturing into Middle East markets, but are more selective of the types of assets in which they invest – focusing on strong and resilient businesses that are able to cope in the current climate, panellists noted.

Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said:

“The global private equity sector is constantly facing new demands and evolving challenges. Here in the GCC, raising funds remains challenging despite the great start-up ideas and the myriad opportunities that the region has to offer investors.”

While the speakers were “cautiously optimistic” for M&A deals in 2021, they advised businesses not to venture into new areas but to focus on their core sectors.

The speakers also highlighted sectors that offer lucrative opportunities for private equity investors, such as sustainability technologies, telemedicine, and EdTech.

Armstrong said the various reforms made by regional governments in improving the financial business landscape and efforts in providing extended and improved terms to support local businesses in growing will lead to greater economic sustainability and long-term benefits for the economy.

Writing by Seban Scaria