MENA Private Equity Fund by rub18840

VIEWS: 71 PAGES: 26

									Arab Private Equity Industry


 Prepared for the AVCA 5th Conference in
       Kenya 6 – 9 November 2005




                                           1
Agenda


  I.    Who we are?


 II.    Private Equity in the Arab World


 III.   Private Equity in Egypt


 IV.    Challenges




                                           2
I.   Who we are?




                   3
               EFG-Hermes
               Egypt’s Premier investment banking firm




Structure

                 Securities             Investment                 Asset               Private
                 Brokerage                Banking                Management            Equity




             EFG-Hermes has 400+ employees, up from 30 in 1994

             Offices in Cairo, Dubai (2002) and Riyadh (2005)
Who we       Listed on the London and Cairo Stock Exchanges with a Market Cap of $1,053Mn (30.Oct.05)
 Are
             Brokerage executed 40% of all transactions on CSE and UAE arm $211Mn in April alone
             Investment Banking raised $ 4.1Bn in equity transactions and advised $ 11Bn M&A transactions
             Asset Management manages 5 local and 3 off-shore funds with a total NAV of $ 750Mn




                                                                                                       4
             EFG-Hermes Private Equity
             5 funds under management plus 2 closing in 2005




                        EFG-Hermes                           EFG-Hermes                            EFG-Hermes

                   Commercial International              Horus Private Equity                 Middle East Technology
                     Investment Company                         Fund                                  Fund
                            1994                                1997                                   2000

                       US$ 189 Million                      US $ 54 Million                      US $ 25 Million




 EFG-Hermes                              EFG-Hermes                           EFG-Hermes                            EFG-Hermes
Jordan IT Fund                    Technology Development               Horus Private Equity               Horus Food & Agribusiness
     2000                                  Fund                              Fund II                                Fund
                                           2004                               2005                                  2005

US $ 4.5 Million                         US$ 9 Million                    US $ 155 Million                         US $ 50 Million




   Aggregate funds under managements US$ 543Mn (incl. US$ 61Mn proprietary investments)



                                                                                                                                      5
II.   Private Equity in the Arab World




                                         6
                           MENA Economic & Market Profile



                GDP $ 619Bn                                                                    Market Cap (28.Oct.05)

                                                                           10%
                                                                 Tunisia   3
                                                               Lebanon     34%
                       Lebanon                                             6
             Jordan      3%      Palestine                                 59%
               2%                                                 Oman         14
                                    1%
            Tunisia                                                        184%
              5%                                                Bahrain        18                                           US$ Bn
                                                                           50%
                                                                                                                        Market Cap/GDP
  Morocco                                    Saudi Arabia       Morocco         27
    9%                                          37%
                                                                           318%
                                                                 Jordan          35
                                                                           70%
                                                                   Egypt             54
Egypt
12%                                                                        417%
                                                                   Qatar                  98
                                                                           250%
  Oman                                                           Kuwait                        122
   4%
                                                                           255%
                                                                    UAE                                218
  Bahrain
    2%                                                                     249%
                                                            Saudi Arabia                                                         589
        Qatar                         UAE
         4%           Kuwait          13%
                       8%
 Roughly that of Spain                                                              Market Cap $ 1,183Bn (192% of GDP)




                                                                                                                             7
                                           MENA Stock Market Trends
                                            Significant growth in Regional Indices



          GCC Countries Market Trends                                                        Non-GCC Countries Market Trends




  Drivers: oil prices & market deregulation                                         Drivers: economic reform and corporate profits


  Abbreviations: ADI (Abu Dhabi), QSI (Qatar), MSI (Oman), SSI (Saudi Arabia), BAX (Bahrain), KUSI (Kuwait), MASI (Morocco), AMMAN (Jordan), HRMS
  (Egypt) and BLSI (Lebanon)


Source: Zawya, 29 October 2005



                                                                                                                                                    8
                                           MENA Private Equity
                                                    Regional PE 2005



          40.00
                                                                                  Saudi Arabia,
          35.00                                                         Qatar, 34.30 36.40

          30.00

                                            Emirates, 26.00
          25.00
                                                       Kuwait, 21.73
          20.00
                                                                Oman, 18.87
                                   Bahrain, 17.80
                                                                                        Egypt, 17.19
          15.00

          10.00

            5.00

            0.00




Source: Private Equity Monitor, EHPE


                                                                                                       9
                                            MENA Private Equity Players
                                      Sample of funds raised or being raised in 2005

          Status         Date       Fund name        Fund Manager          Investment Focus                  Country     Fund
                                                                                                                       Size US$
                                                                                                                          Mn

          Announced      2005       GCC Energy       GCC Energy Fund       Buyouts in the energy sector      GCC         300
                                    Fund L.P.        Managers Ltd

          Fund Raising   2005       Jordan Dubai     Dubai International   Private Equity and Development    Jordan      272
                                    Capital          Capital               projects

          Fund Raising   2005       Markaz Energy    Markaz                Buyouts, focus on energy sector   GCC         165
                                    Fund

          Closing        2005       Horus Private    EHPE                  Buyouts, with no sector focus     Egypt       155
                                    Equity II

          Closed         2005       Oasis            Oasis                 Buyouts, with no sector focus     Egypt       150

          Closing        2005       Horus Food &     EHPE                  Buyouts, focus on agribusiness    Egypt       50
                                    Agri

          Investing      2005       NTEC             NTEC                  Venture capital, early and late   Kuwait      330
                                                                           stages, in technology sector

          Investing      2005       Buyout Fund II   Abraaj Capital        Buyouts, with no sector focus     MENA        300

          Investing      2005       The Pre-IPO      Global Investment     Buyouts, in the IPO or Pre-IPO    GCC         300
                                    Fund             House                 stages

          Investing      2005       SHUAA Partners   Shuaa Partners        Buyouts, with no sector focus     MENA        200
                                    Fund I, L.P.


     Note: Does not include Citadel, an Egyptian buyouts boutique

Source: EHPE, Zawya, October 2005




                                                                                                                                  10
                                                MENA Private Equity
                                           PE Industry Size $ 3.4Bn (< 1% of GDP)

                                                MENA Funds Raised

                      3,500

                      3,000

                      2,500
        US$ Million




                      2,000

                      1,500

                      1,000

                        500

                           0
                               1994    1997     1998    2000    2001     2002    2003    2004     2005
                                                         Fund Inception Year

                     Industry grew at 41% CAGR over past 5 years and projected to grow at 25% in next 3 years
                     $ 2.2Bn raised up to 2004 with > $ 3.4Bn raised or being raised in 2005

Source: Private Equity Monitor, EHPE


                                                                                                                 11
                                             Profiles of MENA PE Funds
                                          60 Funds (1/3rd Buyouts by value and volume)




                        2,500                                                                     25
                                 2,190

                        2,000        20                                                           20

                                                                                             17
         Value US$ Mn




                        1,500                                                                     15




                                                                                                       Volume
                                                 1,281
                                                                    12                   1,123

                        1,000                                                                     10
                                                                 757              9
                                                                               601

                         500                                                                      5

                                                     2
                           0                                                                      0
                                Buyouts      Infrastructure   Technology   Real Estate   Others

                                                   Funds by investment focus

Source: EHPE, Zawya, October 2005




                                                                                                                12
                                                              Trends in MENA PE Funds
                                                                         More focused on Buyouts




                Fund focus (All funds before 2005)                                                                            Fund focus 2005


         $ Mn                                                                                             $ Mn
        1,200                                                                     12                    1,600                                                                     12


                                                                                                        1,400
        1,000        10                                                           10                                 10                                                           10

                                                  9                          9                          1,200

         800                                                                      8                                                                                          8    8
                                                                                                        1,000




                                                                                                                                                                                       Volume
                                                                                       Volume




                                                                                                Value
Value




         600                                                                      6                      800                                                                      6
                                 5
                                                                                                         600
         400                                                                      4                                              4                                                4
                                                                                                         400                                      3
         200                                                                      2                                                                                               2
                                                                                                         200
                                                                1                                                                                               1
           0                                                                      0                        0                                                                      0
                 Buyouts   Real Estate     Technology   Infrastructure   Others                                  Buyouts   Real Estate     Technology   Infrastructure   Others
                                         Investment Focus                                                                                Investment Focus




Source: EHPE, Zawya, October 2005


                                                                                                                                                                                       13
                           Geographic Focus of Fund
                                  2005 and 2006 PE Funds
                                           PE Country Focus




                               Levant, 4                 Egypt, 3

                                                                    Kuwait, 2

                                                                       Jordan, 1
                                                                         Lebanon, 1

                                                                         U.A.E., 1

                      GCC, 9




                                                              MENA, 10


   Shift in the geographic focus of funds. Prior to 2005, many funds were chasing opportunities in
    Levant and Egypt.
   Today, the GCC and MENA, with its buyouts economies, is the focus of close to half of the funds
    being raised.


                                                                                                 14
                        MENA Private Equity Trends
                        Wave of Funds being raised is different

   Median fund sizes increased from US$ 55Mn to US$ 150Mn

   Evolution of Mega funds – NTEC US$ 330Mn, GCC Energy Fund US$ 300Mn

   Investment range increased to attract bigger deal sizes

   More focus on funds with buyout profiles

   More focus on growth and late stage rather than seed, start ups, and SMEs

   Targeting Pre-IPO and trade sale

   Adopting int’l industry reporting & valuation standards

   Technology funds are quickly losing attraction, while energy is gaining momentum

   Shift in the geographic focus of funds

                                                                                15
III.   Private Equity in Egypt




                                 16
                                       Egypt Completed 1st Cycle & going thru 2nd
                                                                                           Private Equity riding the Cycle


    900


    800                                                            Herm es Financial Indes (US$)                                                           GDP Grow th (Basis Points, %100)                                                            Cicle


    700
                                                                                                                                                                                                                                                       Private Equity fund
                                                                                                                                                                                                                                                       raising trends
    600

    500

    400


    300

    200

    100


      0
                   Jan-90


                                     Jan-91


                                                       Jan-92


                                                                         Jan-93


                                                                                            Jan-94


                                                                                                              Jan-95


                                                                                                                                Jan-96


                                                                                                                                                  Jan-97


                                                                                                                                                                     Jan-98


                                                                                                                                                                                       Jan-99


                                                                                                                                                                                                         Jan-00


                                                                                                                                                                                                                           Jan-01


                                                                                                                                                                                                                                             Jan-02


                                                                                                                                                                                                                                                               Jan-03


                                                                                                                                                                                                                                                                                 Jan-04
          Jul-89


                            Jul-90


                                              Jul-91


                                                                Jul-92


                                                                                  Jul-93


                                                                                                     Jul-94


                                                                                                                       Jul-95


                                                                                                                                         Jul-96


                                                                                                                                                            Jul-97


                                                                                                                                                                              Jul-98


                                                                                                                                                                                                Jul-99


                                                                                                                                                                                                                  Jul-00


                                                                                                                                                                                                                                    Jul-01


                                                                                                                                                                                                                                                      Jul-02


                                                                                                                                                                                                                                                                        Jul-03
State of the
                                              Recession                                    Recovery                                      Boom                                  Slowdown                                       Recession                                     Recovery
Economy




                                                                                                                                                                                                                                                                                          17
                                                                  Egypt PE Exits
                                              EHPE Realizations (aggregate all funds)


 Summary                                                                                                   Realizations routes
                                                                                                                          IPO, 5, 7%
 Aggregate realizations 68                                                                                                                                         Trading, 19,
                                                                                                                                                                      28%
                                                                                                     Strategic , 14,
 Aggregate proceeds US$ 504Mn                                                                             21%
                            (2000-2004)




No. of realizations by sector

 16                                                                                                                                  Buyback, 30,
            14                                                                                                                           44%
 14                         13

 12                                     11

 10
  8                                                   7
  6
                                                                   4
  4                                                                                  3           3              3                3               3                 3

  2                                                                                                                                                                                 1

  0
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                                                                                                                                                                                        18
                             Private Equity Players in Egypt
                                     2005 PE Funds with buyout focus

  Private Equity in Egypt
  Status               Fund Name               Manager       Investment Focus                   Inception   Size of Fund
                                                                                                Year           ($ MN)

  Investing           Oasis                    Oasis         Buyouts, no sector focus           2005            150
  Investing           Turnaround Fund          CIB           Buyouts, no sector focus           2005             50
  Closing             Horus II                 EHPE          Buyouts, no sector focus           2005            155
  Closing             Horus Agri               EHPE          Buyouts, agro sector               2005             50
  Fund raising        Direct Invest. Fund II   Concord       Buyouts, no sector focus           2005            100
  Total 2005                                                                                                    505

  Investing           TDF                      EHPE          Venture capital, IT sector focus   2004              9
  Investing           IT Ventures              IT Ventures   Venture capital, IT sector focus   2003            150
  Fully vested        Tech VC Fund             Concord       Venture capital, IT sector focus   2000             30
  Fully vested        Direct Invest. Fund I    Concord       Balanced, no sector focus          1998             35
  Investing           EK Holding               EK Holding    Balanced, no sector focus          1997            120
  Fully vested        Horus I                  EHPE          Balanced, no sector focus          1997             54
  Liquidating         EgyCap                   Delta         Balanced, no sector focus          1997             13
  Fully vested        ADI                      ADI           Balanced, no sector focus          1995             50
  Fully vested        CIIC                     EHPE          Balanced, no sector focus          1994            189
  Total, pre-2005                                                                                               650

  Total Funds                                                                                                  1,155



Note: Does not include Citadel, an Egyptian buyouts boutique


                                                                                                                       19
                                 Private Equity in Egypt
                    US$ 1.2 billion in funds under management (<1% of GDP)


                                     Egypt Funds Raised
        US$ Mn
          500
          450
          400
          350
          300
          250
          200
          150
          100
           50
            0
                 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005


         • Egypt had 9 PE funds managing $ 650Mn up to year-end 2004
         • In 2005, 5 new funds were established targeting $ 505Mn ($ 405Mn or 80% raised to date)



Source: EHPE



                                                                                               20
                   Egypt Private Equity Trends
                            SMEs PE Financing


                               PE financing for SMEs in Egypt
                        SMEs
                         9%




                                                     Buyouts, no
                                                     sector focus
                                                         91%




   10% of 2005 PE investments in Egypt are available for financing SMEs
   Majority of the Egyptian business are SMEs
   SMEs financing available totals $ 59Mn
   Sector Specific IT ($ 9Mn) and Food and Agri ($ 50Mn)


                                                                           21
                         Egypt Private Equity Trends
                          Larger funds with buyout perspective



   Median fund sizes increased from $ 50Mn to $ 100Mn

   Investment range increased (Horus I ceiling $ 10Mn verses $ 30Mn Horus II)

   Majority control less emphasis on controlled minority

   Focus on recapitalization, turnarounds and privatizations

   Growth and late stages with less on start ups and SMEs

   Size important for potential IPO

   Building management teams to implement value-added strategy




                                                                                 22
IV.   Challenges




                   23
                             Challenges facing PE Industry
                                   EHPE Experience in the Region


   Lack of PE financing for SMEs and Startups
            Int’l institutions not interested & local institutions will participate only if they do
            Difficult to exit
   Regulatory Environment
            Setting up local funds
            Enforcing shareholder agreements
            Codification of law
            Foreign Ownership
   Due-diligence
            Law firms and Auditors are catching up to develop
   Human Capital
            PE requires a special reservoir of high caliber human capital
   Investment Support
            Lack of strong management to implement investment strategy
   Exit Mechanisms
            Volatile Capital Market in the region




                                                                                                       24
                  Arab Private Equity Association
                             APEA Core Mission

   Encourage cooperation between members in terms of providing
    resources, tools, and ensuring the fair pricing and high quality of materials
    in such a transaction
   Enhance deal flow between member companies
   Encourage the exchange of information and experience between
    members
   Increase opportunities for Cross-Country Investment
   Bringing PE concerns to the attention of governments and private
    investors
   Support for research, business information, economic feasibility studies,
    and statistics
   Providing the means for contacting Arab and foreign research groups
   Afford training, and knowledge for industry professionals on the technical,
    financial, legal aspects of Direct Investments as well as Venture Capital
   Organizing conferences, workshops and networking opportunities



                                                                               25
EFG-Hermes Private Equity
9 Mohamed Fahmy Street, 14th Floor
Garden City
Cairo, Egypt.
Tel: (202) 7923875/6/7
Fax: (202)
Email: ciic.com.eg



                                     26

								
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