Financial Investments in MENA Region

photo-mena

Financial Investments in MENA Region
Oil and gas industry investments have been declining over the past couple of years and continue to decline, thus private equity investors are concentrating on consumer-related business for their investments. Consumer-related investments in the MENA region have increased substantially over the past couple of years – since 2016 – and continue to increase because of the stability of investments in the area. While all of the regions in MENA have seen an increase in consumer-related investments, the UAE has by far seen the most, by 62% as of 2016.

Private Equity

The newest MENA Private Equity & Venture Capital report, dated 15 June, 2017, showed the most transactions in the MENA region since 2008. In 2016, 244 transactions were announced. The report showed that private equity deals were consistent with 2015 at $50 million (USD). Most firms invested in deals of up to $20 million, though a few had investments that were over $20 million. The average deal size from 2015 to 2016 remained consistent. Some of the challenges faced include inflation, economic slowdown and lower oil prices. Because of the lower oil prices, investors put their money into consumer-related investments. Also, the “deal by deal” model, where funds are raised for specific transactions, has become more prevalent over the years, and is still a popular way to invest. The report cautions that it is not comprehensive, as up to 30 percent of the private equity and venture capital transactions are not announced. Furthermore, for those transactions that are announced, not all of them include details regarding the size of the transaction. Announced private equity transactions rose from 53 transactions in 2015 to 69 transactions in 2016.

Venture Capital

Dubai has been the top area in MENA for venture capitalists to invest, giving the UAE the highest number of start-ups at 42 percent. Egypt sees 12 percent of venture capital start-ups, while Lebanon and Jordan see 9 and 8 percent, respectively. Partially because of lower oil prices, some MENA countries are trying to get in on the venture capital market. Saudi Arabia has launched a plan to invest $3.5 billion in a United States tech company to help the country see more venture capitalists. Oman has its first venture capital firm, Innovation Development Oman Holding, with initial capital of $129 million. The Oman Investment Fund has created the Oman Technology Fund with $200 million. Total venture capital investment in MENA is about $560 million and is expected to grow steadily. While most of the venture capital is from investors based in MENA, times are changing, as shown by Amazon’s acquisition of Souq.com. Because operating in MENA does have its hurdles, including but not limited to government regulations and oil prices, venture capitalists are reluctant to invest in the region. However, many areas in the region are becoming more stable as countries amend legislation to make it easier for foreigners to invest. This includes not requiring local ownership and implementing “free zones” in many countries. The free zones allow 100 percent foreign ownership. The lack of transparency in investment criteria and financing terms has always been a problem for investors who wish to invest in MENA. However, over the past couple of years, several countries in MENA have become more transparent and have made it easier to procure information on investments. The MENA Private Equity Association is part of the solution as it provides reports on investments in the area, giving investors more negotiating power.

Private Equity

The newest MENA Private Equity & Venture Capital report, dated 15 June, 2017, showed the most transactions in the MENA region since 2008. In 2016, 244 transactions were announced. The report showed that private equity deals were consistent with 2015 at $50 million (USD). Most firms invested in deals of up to $20 million, though a few had investments that were over $20 million. The average deal size from 2015 to 2016 remained consistent. Some of the challenges faced include inflation, economic slowdown and lower oil prices. Because of the lower oil prices, investors put their money into consumer-related investments. Also, the “deal by deal” model, where funds are raised for specific transactions, has become more prevalent over the years, and is still a popular way to invest. The report cautions that it is not comprehensive, as up to 30 percent of the private equity and venture capital transactions are not announced. Furthermore, for those transactions that are announced, not all of them include details regarding the size of the transaction. Announced private equity transactions rose from 53 transactions in 2015 to 69 transactions in 2016.

Visit Realopedia

Visit Realopedia and browse the many investment opportunities. If you can’t find what you’re looking for, contact us via email, phone or on social media.