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Gulf Capital aims to invest in Saudi’s education sector.

Investing in the Kingdom's education sector is a "no-brainer" explains El Sohl: "We are very excited about education in the Kingdom. Saudi is the biggest country... half of the population in Saudi is under eighteen and it's one of the fastest growing populations in the world, so investing in education in Saudi was a no-brainer for us and we wanted to be the market leader.

"This will be a prime company to take public or sell in Saudi Arabia because its profile, track record, and historically sectors like education are seen as very defensive and prime IPO candidates in other markets," he adds. He expects the rest of the fund's investments will also be in social infrastructure as the region's population increases and countries ramp up investment in healthcare, education and infrastructure. According to the consultancy firm, McKinsey, the GCC's current population of 38 million will double by 2025.

Investment in healthcare, particularly in Saudi Arabia, is only likely to grow as its population does. According to McKinsey, private investment in healthcare is set to triple to $60bn by 2025 while GVCA estimates that healthcare attracted sixteen percent of all private equity investments last year.

In a further indication of an influx of private investment into the sector, in October, the Saudi Arabian General Investment Authority announced plans to privatise or outsource the management of all 218 government-owned hospitals.

"We are investing in a lot of social infrastructure like education, healthcare and the like. We are looking at a third deal, which we are expecting to announce in a month and a half in the healthcare sector," El Sohl says. "The healthcare sector is growing rapidly and it's also a very defensive sector. It doesn't matter what happens to the economy and the stock market, healthcare continues to increase.

"A lot of it is fuelled by government spending so we like the profile very much because it's a low risk investment, but exhibits high growth."

He also sees opportunities in the food sector, an area a number of GCC firms have shown interest in following last year's global food crisis. "Food security is something that is very topical these days," he explains. "The population is growing very fast and investing in that sector makes sense."

Gulf Capital might not have had any trouble securing the cash for its second fund, but El Sohl admits that debt funding is still his firm's biggest challenge amid the downturn. But while the shortage of liquidity might be tough for the time being, he argues it does have its benefits. Most notably that more
family-owned owned conglomerates are looking to sell their non-core assets to private equity firms.

"We are dealing with a number of family businesses and local firms and on the contrary we are seeing much more flexibility in terms of selling at least the non-core businesses," he explains. "If you have your typical family business with eighteen units, because of lack of liquidity and lack of bank financing and the virtual shutdown of the capital market, they are forced to focus on the core and diversify the peripheral businesses.

"Two to three years ago they would say everything is sacred, nothing is for sale, now they are saying we would be interested in spinning off this non-core business."

As more of the region's private companies turn to private equity and the global recession continues to restrict liquidity, El Sohl predicts greater consolidation in the industry.

"It's a natural thing; it happened in Europe where you have the top ten players growing bigger and bigger and the others left behind. Smart money inevitably graduates to the firms with the best performance and as more and more of us do investments and exit and deliver on the track record, we will attract a bigger share of the total pool."

Judging from its latest announcements, Gulf Capital looks like one of the lucky ones.

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