Middle East and Africa Private Equity Market Size

Middle East and Africa Private Equity Market Analysis

Private equity fund (PE Fund) investments in promoting private sector development in emerging markets were challenged by the COVID-19 pandemic. Around 88 percent private equity, deal-making activity in the Middle East and Africa (MEA) decreased in the second half of 2020.

The Middle East and North Africa (MENA) is a region that has long been in the sights of the international private equity community. As an emerging market, it offers superior economic growth rates and, there is now a demand amongst companies in the region for investment and expansion. National governments are rapidly becoming aware of the economic benefits private equity can bring, not just as providers of capital but also as importers of good business practices. Geographically situated at the heart of some of the world's most important trade routes, the countries comprising the MENA region are culturally, politically, and economically diverse.

Investing in the Middle East and Africa presents both familiar and unfamiliar challenges. In addition to the familiar issues around assessing financial performance and prospects, structuring to optimize tax treatment, ensuring appropriate levels of control and facilitating an exit, there are also a number of additional, unfamiliar issues to be considered. Bilateral investment treaties (BIT) may be available to protect investments against expropriation without adequate compensation. There are over 2,200 investment treaties in force, and they can provide for international arbitration of treaty claims as an alternative to local courts. Traditionally most private equity investments in Africa have involved minority investments in young and emerging companies, as opposed to majority investments or in mature businesses. Minority investments naturally give rise to their own challenges, particularly in relation to control issues (or rather the lack of control) and difficulty of exit.