Political unrest and flagging Middle Eastern markets have stalled buyout activity across the region, but some local private-equity players say they are beginning to dip their toes in the water again.
There were no publicly announced private-equity investments in the Middle East and North Africa (Mena) region in the third quarter of this year, according to a report from Bureau van Dijk, a Dutch research firm.
Yet the slowdown has meant opportunity for such players as Abu Dhabi Capital Management (ADCM), an alternative investments company that has been taking over western investors' stakes in regional private-equity funds this year.
"We are generating triple-digit returns for our investors right now because we have been investing in a very distressed environment," said Jassim Alseddiqi, the company's chief executive, speaking on the sidelines of a private-equity conference in Dubai.
"We made a lot of investments in March at the peak of the Arab Spring, when a lot of investors sold off Mena assets."
ADCM had raised US$100 million (Dh367m) from investors since it opened in January, Mr Alseddiqi said. The plan was to reach $1 billion in assets under management in the next three to five years, a goal he said was realistic in spite of shakiness among investors amid continuing global uncertainty.
"We are on track, and we have been very successful in raising money," he said.
Tuninvest-Africinvest, a private-equity group with more than $550m under management, has also restarted investment in its native Tunisia since the revolution early this year, according to its founding partner, Aziz Mebarek.
"We had stopped investing in Tunisia in the 30 months before the revolution, because there's nothing more uncertain than a situation of corruption," he said. "People tend to forget that."
After the revolution, he said, "we committed to four investments, and we have divested from a [company in] consumer goods activities to an international company which has put a big cheque on the table. We have continued to do business".
Those moves come as many private equity firms in the region shy away from countries affected by unrest and revolution.
Firas Nasir, a managing director at the Carlyle Group who oversees its Mena fund, said the focus in coming years would be on the GCC and not on North Africa, simply because there was "a lot of uncertainty there".
Carlyle bought General Lighting, a Riyadh-based light fixtures manufacturer, last year, and is in talks to buy a food processing and retail company in the kingdom, he said.
"I think government spending programmes, robust oil prices and surpluses accumulated over the past few years should allow the GCC to withstand economic difficulties in much better shape than other regions around the globe, so we're actively looking for investments here," he said.
"Saudi is particularly attractive due to its robust asset base, liquid public market and the scale of local businesses that can be transformed into regional leaders."
But one inhibitor of private-equity deal-making in the UAE and other Gulf countries, he said, was a recent decline in activity on local stock markets.
The dearth of trading has made private-equity investments in these countries less attractive by eliminating public stock listings as viable ways to exit investments.
Those issues have not deterred ADCM, however. Mr Alseddiqi said the company planned to focus on the GCC and the UAE even as it continued to look for distressed assets in the rest of the Arab world and even Europe.
"For the Mena region, I split it into two," he said. "There is the opportunistic, high-risk, high-return area, which is Egpyt, Libya, Syria and ex-GCC. The GCC, however, I am very bullish about. There's spending, high growth, low taxes, still there are a lot of development projects, and markets are underpenetrated."
