PRIVATE EQUITY IN THE GCC REGION
Private equity before 2005
The private equity scene in the GCC prior to the latest surge of oil prices was
quintessentially similar to the desert spanning most of the landscape across the region.
There were small oases preaching the merits of private equity ("PE") and venture capital
("VC"), but by and large there was very little activity.
Paradoxically, the region has been supporting many of the leading global PE players
since the 1980s. For example, the Carlyle Group and Investcorp have relied, to various
degrees, on the petrodollars from the GCC to launch their PE practice in the 1980s.
Many of the global PE players regularly frequent their investors in the region, and their
clients include most of the sovereign wealth funds such as the Abu Dhabi Investment
Authority ("ADIA") and the Kuwait Investment Authority ("KIA").
In 2002, Rasmala announced the first true Management Buyout Fund ("MBO"), when it
backed the management of Aramex, a regional courier and logistics company, to delist it
from the NASDAQ. The deal, valued at $65 million, was relatively large then, and
captured the attention of the investment community in the region. By the time Aramex
was listed on the Dubai Financial Market in early 2005, the deal became, and still
remains, the benchmark and model for PE practitioners in the region.
Starting 2002, oil prices began their continuous climb from $20/barrel, rising around 30-
40% annually. Liquidity from petrodollars was compounded by the repatriation of capital
from the west following the 9/11 events. The excess capital was first directed towards
the capital markets, which appreciated 100% annually between 2003 and 2005. Liquidity
then filtered into real estate, which in the past few years witnessed a flood of announced
mega real-estate projects (for example, the Palm, DubaiLand and King Abdulla
Economic City). In 2005, some of the excess liquidity moved into private equity, jump
starting the industry.