Study: UAE private equity to slow, become more focused

Private equity in the UAE is not immune to the global financial crisis and will experience a ‘natural shift in its business model’ over the next three to five years, a survey has found.

The shape of the private equity industry in the UAE is set to change over the next three to five years, with a slowdown in deal flow leading to fewer, larger deals and possible consolidation of GPs, a survey by Dun & Bradstreet has found.

Increasing saturation in terms of the number of funds in the region combined with limited deal flow would, survey respondents said, lead to a number of changes including a migratation away from the prevailing “opportunistic general” investment strategy to a focus on specific sectors. Respondents also said there was likely to be some consolidation amongst GPs, as well as a move to a more “sophisticated” deal model.

Deal sizes, it was anticipated, would move from the current typical range of $40 million to $60 million, to include transactions of around $100 million, and there would be greater emphasis on buyouts, sophisticated financial products, and secondary sales.

The survey, which took place via “in-depth discussions” with “key industry leaders” between August and October this year, also found 28 percent of respondents predicted economic slowdown in the region and 26 percent foresaw the lack of developed financial markets as a significant challenge to the UAE.

Despite this, the overall perception of private equity in the region remained positive, with 60 percent of respondents claiming to be “optimistic” when looking at the period 2008 to 2011. Some 66 percent of respondents projected growth in excess of 20 percent in fund sizes by 2011.