The PEI Asia 30

Welcome to the PEI Asia 30, PEI Asia’s first annual ranking of the largest private equity firms from the Middle East and Asia Pacific. Calculated according to the amount of private equity direct investment capital raised or created over the past five years, the list is based on research proprietary to PEI Media.

The firms in this year’s PEI Asia 30 have amassed nearly $80 billion between them over the last five years – a big figure dedicated to some of the world’s fastest growing markets. Sitting
at the top of the ranking are four firms from the Middle East and North Africa, but the full list encompasses firms from across the entire region.

Every year, PEI Asia will recalculate the PEI Asia 30, allowing readers to track the rise – or fall – of the region’s top private equity players.

The top five

1  Abraaj Capital
Capital raised over the last five years
(US$ million): $6,493
Founded: 2002
Headquarters: Dubai
It won’t be much of a surprise to many readers to find Middle Eastern behemoth Abraaj Capital taking the top spot in the PEI Asia 30, with a clear half billion lead on its nearest peer, Investcorp. Currently targeting a $4 billion close on its third buyout fund, which saw a $3 billion first close late last year raised entirely from existing LPs, the firm is forging forwards and expanding its team at a time when some other Middle Eastern investors are pulling back. In fact, Abraaj has seen its team go from 130 at the start of 2008 to 165 and counting. Is there no end to this firm’s growth? Who knows? A spokesman recently told PEI Asia: “Are we going to carry on growing at the same pace as last year? I don’t know. The world is in trouble, but this region is still growing and we’re growing with it.” There is certainly no denting the optimism of Abraaj founder, Arif Naqvi, who told delegates at this year’s PEI Middle East Forum, “The returns private equity in MENA has achieved in the past will be dwarfed by what the industry can achieve in the coming years.”

2  Investcorp
Capital raised over the last five years
(US$ million): $5,958
Founded: 1982
Headquarters: Manama (Bahrain)
While still riding high in terms of private equity capital raised over the last five years, the economic downturn has hit listed investment group Investcorp hard. First off, the group attempted to cut costs by eliminating 20 percent off staff across its offices in Bahrain, London and New York. Next, the firm saw its credit rating written down by ratings agency S&P in January because of concerns over its private equity, hedge fund and real estate businesses.
After  that, the group announced its first ever net loss in February – which included
a $95 million write-down on its private
equity portfolio for the six months to end
of December 2008. Despite this, there are some green shoots. The firm, which previously focused only on investment in the US and Europe, recently made a second investment from its Middle Eastern growth fund, Gulf Opportunity Fund 1, taking a 51 percent stake in Saudi Arabian jewellery company L’Azurde.

3  Arcapita
Capital raised over the last five years
(US$ million): $4,839
Founded: 1997
Headquarters: Manama (Bahrain)
Like the larger Investcorp, Arcapita has predominately concentrated on investments in Europe and the US: as of March this year, 53 percent of its deals had been in the US and 46 percent in Europe, with the remaining 1 percent in India. The bulk of Arcapita’s private equity team is in fact based in its Atlanta office, in the US. Also like Investcorp, Arcapita was subject to a ratings downgrade by S&P in January, reflecting the firm’s “low liquidity”, “narrow business diversification”, and “high leverage”. Nonetheless, with its loyal base of Middle Eastern investors and its long heritage as a pioneer of shariah investment, it is unlikely Arcapita will be knocked down for long.

4  Citadel Capital
Capital raised over the last five years
(US$ million): $4,100
Founded: 2004
Headquarters: Cairo
In just five years, Citadel Capital has risen to become one of the key names in MENA private equity – grabbing its place in the major league with the $1.4 billion sale of Egyptian Fertilizers to an Abraaj-led group in 2007. Rather than raise traditional blind-pool funds, Citadel’s starting approach in private equity was to raise what it terms an “opportunity-specific fund” for each “platform” investment it makes in its core geographies of the Middle East and North Africa. In April, however, the firm held a first close on $51.5 million for a distressed fund called Sphinx Turnaround Fund, being raised with Citadel subsidiary, Sphinx Private Equity Management, to invest in Egyptian SMEs. Citadel is also expecting to hold a first close on its first institutional fund, the Citadel Capital Joint Investment Fund which is targeting $500 million, sometime soon. Not that fundraising is easy, as chairman and chief executive Ahmed Heikal ruefully admitted to PEI sister publication, Infrastructure Investor: “One of the paradoxes of raising money is that it is very difficult to raise money when the time is exactly right.”

5  MBK Partners
Capital raised over the last five years
(US$ million): $4,060
Founded: 2005
Headquarters: Seoul
The first of the PEI Asia 30 from Asia Pacific, and the only one to make it into the top five, South Korea’s MBK Partners has weighed in as a buyout heavyweight in the last few years. Most recently cited as one of the three firms vying for South Korea’s Oriental Brewery (by the time of going to press, MBK and Asian co-competitor Affinity Equity Partners had been pipped to the post by global giant KKR), MBK has made its mark as a North Asian specialist. In October 2008, it was selected by South Korea’s National Pension Service (NPS) to enter into a strategic partnership to explore investment opportunities in Korea. As part of the agreement, MBK will invest up to $2 billion on a transaction-by-transaction basis over an undefined period of time. MBK was the only local firm to sign up with the NPS, which also entered into similar agreements with Oaktree Capital Management and The Blackstone Group.

How the PEI Asia 30 came to be

The rules and definitions used to create this inaugural ranking of the Asia Pacific and Middle East region’s largest private equity firms.

Ranking private equity firms by size is not by any means an easy task. First one needs to define “private equity” and “size”.

Then one needs to gather accurate capital-formation information on lots of firms in what is among the most opaque markets in the world.

The result of this hard work is the PEI Asia 30, the first ranking of private equity firms in Asia Pacific and the Middle East according to their size. A firm’s rank among the largest 30 private equity firms in the region is determined by how much private equity direct investment capital that firm has raised over a roughly five-year window ending this April.

The PEI Asia 30 sits alongside the PEI 300, an annual ranking of global private equity firms conducted by sister publication Private Equity International (PEI 300), and comes from the same research.

In compiling the rankings, we are certain that we missed some important details, but we are equally certain that we exhausted every available resource in sourcing the best information. Private equity remains a non-transparent asset class, but it is getting more transparent with each passing year. We therefore believe that the PEI Asia 30 will become more authoritative as a guide to the most important investment firms in the growing Asia Pacific and Middle Eastern private equity markets.

What is the PEI Asia 30?

The PEI Asia 30 is a ranking of private equity firms in the Asia Pacific and the Middle East by size. It is the only apples-to-apples comparison of dedicated, direct-investment private equity programmes in the region. This year’s list is the first of what will become an annual fixture in PEI Asia magazine.

The PEI Asia 30 is not a performance ranking, nor does it constitute investment recommendations. The PEI Asia 30 includes private equity firms with varying structures and strategies across the Asia Pacific and Middle East. While the list is mostly made up of private equity firms that manage private equity limited partnerships, it also includes firms with multiple strategies and business lines, and firms
with publicly traded vehicles.

However, only a defined type of private equity capital is counted in determining the PEI Asia 30 rankings,as described below.

The PEI Asia 30 only measures capital raised or formed within a five-year window spanning from 1 January 2004 until 15 April 2009.

In coming up with our key “2009 PEI Asia 30 Five-Year Fundraising Total” figures, upon which the PEI Asia 30 rankings are based, we rely on the most accurate information available. We give highest priority to information that we receive from or confirm with the private equity firms themselves, always on background.

When the private equity firms themselves confirm details, we still seek to “trust but verify”.

Some details simply cannot be verified by us, and in these cases we defer to the honour system. In order to encourage cooperation from private equity firms that might make the PEI Asia 30, we do not disclose which firms have aided us on background and which have not. Lacking confirmation of details from the firms themselves, we seek to corroborate information using any available resources, including the firms’ own websites, press releases, news reports, third-party databases, limited partner disclosures, etc.

Definitions

To help answer this question – how much private equity capital has the firm raised since 1 January 2004? – we needed to set some definitions:

“Private equity”: The definition of private equity for the purposes of the PEI Asia 30 means capital raised for a dedicated programme of investing directly into businesses. This includes equity capital for diversified private equity, buyouts, growth equity, venture capital, turnaround or control-oriented distressed investment capital, and mezzanine debt. Our rankings do not take into account funds of funds capital, capital raised for primarily real estate strategies, hedge fund capital, infrastructure and debt capital.

“Capital raised”: This means capital definitively committed to a private equity direct investment programme. In the case of a fundraising, it means the fund has had a final or official interim close after 1 January 2004. We count the full amount of a fund if it held  a close after this date. We also count the full amount of an interim close that has occurred recently, even if no official announcement has been made. We also count capital raised through other means, such as LP co-investment vehicles, deal-by-deal LP co-investment capital, publicly traded vehicles and earmarked annual contributions from a sponsoring entity, when we are able to access this information. Where capital is raised in partnership with an affiliated entity, we take into consideration the economic relationship between the two entities, as well as how the fundraising was marketed to investors.

We count mezzanine debt raised by firms that are primarily engaged in private equity investing. We only count equity raised for these funds, not the leveraged “buying power”. Mezzanine debt frequently involves warrants for equity stakes, and has historically been counted alongside buyout capital by industry media and data services groups.