When Dubai International Capital (DIC) was created two years ago, one of its stated aims was to become a member of the international private equity club.
It certainly had the cash to join. DIC is part of Dubai Holding, the multi-facetted investment arm of the government of Dubai, which is determined to use the emirate's petrodollars to diversify away from oil. As part of this effort, DIC exists primarily to invest in public and private companies in overseas markets and has so far a massed a $5 billion portfolio of assets far a massed a $5 billion portfolio of assets-no mean feat from a standing start.
It has written big cheques to become a limited partner in funds advised by 3i, The Carlyle Group, JPMorgan, Kohlberg Kravis Roberts and Texas Pacific Group. It splashed out on a $1 billion stake in DaimlerChrysler, the carmaker. It also made a number of high-profile private equity deals in the UK, deals that were in part designed to demonstrate to London's general partner elite that DIC was an outfit worth knowing.
Following a string of big-ticket secondary buyouts, DIC currently owns the Tussauds Group, the iconic operator of European tourist attractions; Doncasters, a British engineering firm with a history spanning 200 years; and Travelodge, a UK budget hotel operator.
Now, DIC is reaching for its biggest prize yet. At press time, the group looked set buy Liverpool Football Club, one of the most valuable brands in the game and an asset that will turn DIC into a global household name overnight. Just ask Roman Abramovich.
You may ask: Doncasters? Liverpool FC? How can a UAE-based private equity investor with a two-year track record be buying these businesses?
Sameer Al Ansari, DIC's chief executive, has had ample opportunity to answer such questions. During a recent interview at the group's headquarters in Dubai, he told me that the international media's reaction to the firm's early acquisitions had brought out “all the negatives”, the cliches about “dumb money from the Middle East”. He also argued that since then the group has been able to prove the sceptics wrong.
He said DIC has a clear idea of what it can and cannot do, and does extensive due diligence to identify suitable opportunities. It seeks to invest in well-run, fast-growing businesses that are leaders in industry sectors that the group understands. Potential deals need to show a feasible IRR of 20 percent and can be relied upon to deliver 15 percent at a minimum. No home-runs, in other words. Secondary buyouts fit the bill perfectly, because they involve companies where the previous owner is supposed to have done most of the heavy lifting already.
Given these criteria, buying one of the biggest football clubs in the English Premiership could be something of a departure. For a start, the club, which is controlled by Liverpool's Moores family, will be new to private equity ownership. Its financial success depends in part on its success on the football pitch, which is harder to forecast than receipts at Madame Tussauds or occupancy levels at Travelodge. And it has rivals such as Abramovich's Chelsea, which appear to be less preoccupied with the bottom line than most other businesses in less glamorous industries.
Still, football clubs with a global following clearly have exceptional money making potential, particularly at a time when the game's popularity is at a peak. And with the prospect of a new s200 million, state-of-the-art stadium for the club, Liverpool can be more than just the ultimate trophy deal for a big spender from the Persian Gulf.
While it works toward cutting a deal with the Moores, DIC will also carry on cultivating relationships with private equity. According to Al Ansari, the firm intends to raise third-party capital from Middle Eastern institutions to finance future acquisitions. Geographic expansion is also on the cards: a London office is scheduled to open in 2007, and offices in the US and Asia are also part of the plan.
“Money is our competition, it is global and has no borders,” observed Al Ansari when I met him. Clearly his own agenda is global as well. For the time being, however, as underlined by the Liverpool adventure, expect DIC's focus to remain on Europe.