While private equity firms saw a reduction in the level of new funds raised in 2012, the investment sector has shown strong signs of recovery, with the overall pool of funding available to SMEs, technology and media companies attracted significant interest throughout the region last year.
The 2012 Private Equity and Venture Capital in the Middle East Annual Report, issued by the MENA Private Equity Association and compiled in collaboration with KPMG and Zawya, found the total number of investments increased from 84 in 2011 to 91 in 2012, a year-on-year increase of 8.33 percent.
While the overall total value of funds announced rose by $200m to $1.1bn last year, there was a decline in the value of new funding raised and added into the pool of financing available, down from $900m in 2011 to $400m in 2012.
“The reduced level of fundraising… reflects the general lack of deal flow in the region as regional PE (private equity) players continue focusing on preserving and enhancing value from existing portfolios and preparing for successful exits,” the report said.
The report added that the average investment size remained stable at $8m, with no increase in the past three years, reflecting continuing focus on venture capital, growth capital and SME investments.
The authors also suggested that part of the growth in private SME investment was due to the continued reticence of banks to loan to SMEs – especially within the UAE.
Ali El Arab, product manager from Zawya, said: “We see a clear trend in the industry where many fund managers across the MENA region are making a marked contribution to economic growth.
“For example, fund managers are giving more attention to young companies who are looking to grow their business, and this has resulted in a higher number of venture and growth capital deals which has and will continue to benefit the SME community.”
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