When the region’s leading deal makers and investors gather in Abu Dhabi for the 4th Annual SuperReturn Middle East Private Equity Summit from October 18th – 20th, we can expect some discussion about the next big trend in Middle East private equity.
In previous years the focus was largely on mega leveraged buyouts but this year attention will most likely turn to small and midmarket private equity. A confluence of factors is forcing the shift from larger to smaller deals. The most obvious factor is the collapse in fundraising activity. Fund managers raised only US$1.06bn in 2009 compared to a near-record US$5.4 billion in 2008. This has led to smaller funds being raised that are taking almost twice as long to close. It is estimated that average fund size will shrink from pre-2008 levels of $350m down to approximately $200m. The impact on regional PE firms of smaller funds combined with limited availability of debt finance will be to shift their focus from larger deals to smaller deals with average deal size of approximately $25 million.
Northbridge (NBI) completed the transformational Tasman acquisition in July, so there was no financial impact on the first half and the interims suggest that NBI is on track to meet previous expectations. We forecast the acquisition to be earnings-enhancing in 2010, with PBT up to £3.9m (vs £3.1m)