Privately Speaking: Abraaj’s ambition

Philip Borel spoke with several senior partners in the new business about the strategy they’re seeking to execute.

In early March, at a town hall meeting in Dubai,    Arif Naqvi told the 220 colleagues present that a year after the 2012 merger with Aureos Capital, Abraaj Group had gone past an all-important milestone. “Our integration process is complete. Now it is time to execute,” the firm’s founder and group chief executive declared.

In private equity, corporate M&A is a rarely used franchise expansion tool, and the Abraaj-Aureos combination certainly was an unusually audacious bid to create an international growth capital provider. It gave birth to a new business with numerous investment funds and around $7.5 billion in capital under management. 

The new firm currently manages 25 separate funds, including the $2 billion Infrastructure & Growth Capital Fund raised by Abraaj in 2007; the $183 million Latin America Fund (Aureos, 2007); the $380 million Africa Fund (Aureos, 2008); and the $105 million Africa Health Fund (Aureos, 2009).  

It has 33 offices, 150-plus investee companies, more than 170 professionals and approximately 300 investors. Make no mistake, the new Abraaj Group is a big, multi-layered organisation.

When the deal was first announced, it would likely have struck outsiders as a union of two very different entities: on the one hand Abraaj Capital, a large Middle East, North Africa and South Asia-focused buyout firm which was founded in Dubai in 2002; and on the other hand a smaller, global SME investor set up in 2001 by UK development agency CDC Group together with Norway’s government-owned Norfund, and operating in a multitude of early-stage private equity markets including Costa Rica, Zambia and the Philippines. 

Not that this perception would have been incorrect (albeit that pre-merger Abraaj Capital was not just doing private equity buyouts but also growth capital and investments in real estate and infrastructure). But what the deal’s architects would likely have told you at the time, and will certainly seek to draw your attention to today, is that the transaction was always intended to create a globe-spanning investment platform capable of delivering a differentiated private equity product across the relevant regions.

Put simply, Abraaj Group’s ambition today is to be the foremost mid-market investor in what it calls the world’s ‘growth markets’. In terms of equity ticket size, the sweet spot is in the $20-80 million bracket. Substantially larger deals have been made – such as the $361 million acquisition in 2009 of a majority stake in Pakistani utility Karachi Electric Supply Company – and continue to be possible too, with LP co-investment included where appropriate. 

In late March, on the eve of an investor meeting at the Corinthian hotel in London, several of the firm’s senior executives met with Private Equity International to explain how the unified firm is going about the pursuit of its goals.