Builders of investments, not financial engineers, will thrive in this vintage year for private equity investing in the Middle East and Africa, Citadel Capital Chairman and Founder Ahmed Heikal tells participants at Oxford University's annual private equity conference.
Private equity firms in mature economies face strong headwinds from their over-reliance on debt in recent years, but firms specializing in the Middle East and Africa are in a vintage year for private equity investing, the founder of the Arab world’s leading private equity firm recently told participants at the Fourth Oxford Private Equity Forum in Oxford, United Kingdom.
“The business climate in the Middle East and Africa may be more challenging today than in 2008, but it is still significantly healthier than in most developed economies,” said Ahmed Heikal, Chairman and Founder of Citadel Capital, the Cairo-based private equity firm whose 14 opportunity-specific funds control platform companies with investments of more than US$ 8.3 billion in 12 countries across the Middle East and Africa.
“While some would sound the death knell for private equity, those among us with truly creative, entrepreneurial spirits will use the year ahead to put together deals that portend serious returns when growth accelerates in the next decade. They key is to look at deals that lend themselves to an incremental execution,” he told attendees in a keynote speech at Oxford’s Saïd Business School on March 14, 2008.
Guests included key figures from the private equity, venture capital and hedge fund industries as well as government leaders and students.
With leverage now increasingly difficult to obtain even in liquid markets such as Egypt, Heikal said, “The Middle Eastern private equity industry must return to its roots as patient builders of investments. As we do so, the theme of 2009 and heading into 2010 will be mid-to-large-size deals executed in multiple phases. Call it an ‘incremental’ approach to private equity, if you will: one in which you can lock in large, attractive investment opportunities with very little in the way of up-front capital commitments.”
This shift in private equity will favor the well-prepared control investor who is willing to roll up his sleeves and help build the platform companies in which his funds invest, Heikal told participants.
“It may not be as thrilling as the boom years that have just come to an end,” he concluded, “but the phase ahead will separate the financial engineers from those among us who understand what business is all about: Creating value for limited partners and shareholders alike by building viable businesses for which others will be willing to pay a premium.”
Citadel Capital is the leading private equity firm focusing on building regional platform investments throughout the Middle East and Africa in selected industries through acquisitions, turnarounds, and greenfields executed via Opportunity Specific Funds. Citadel Capital’s 19 OSFs now control Platform Companies with investments worth more than US$ 8.3 billion in 14 industries, including mining, cement, transportation, food and energy. Since 2004, the firm has returned more than US$ 2.2 billion in cash to investors, more than any other private equity firm in the region.
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