Access to capital is unlikely to be a problem for private equity firms in the Middle East as the region is flush with liquidity and regional GDP is set to grow 3.5% in 2010 according to a report by Insead.

The report suggests that even if investment activity were to return to the levels of 2005-07 it would still take more than five years to invest available capital. It’s estimated that Middle Eastern private equity firms are sitting on about $11 billion of capital raised before the economic downturn usually referred to as 'dry powder' within the industry.

The survey of industry participants shows that regional PE firms are gearing up to provide more operational support to their portfolio companies, helping with operational activities such as executive recruitment and partnership development.

The dominant trend will continue to be investment strategies focusing across the wider MENA region with a few countries such as Egypt and UAE being most active. Over the last investment cycle Egypt accounted for over 40 per cent of private equity deals in the Arab world followed by UAE at 27 per cent.

There is an expectation that deal activity in Saudi Arabia will feature more prominently as family-run businesses and the SME sector begin to understand the potential benefits of private equity through corporate governance, value add through operational involvement and providing exit routes through capital markets and trade sales.

New opportunities will also emerge as the corporate sector consolidates business portfolios and divests non-strategic assets. Private equity firms will look to pick up assets across a range of sectors focusing on non-cyclical defensive assets.