The weakening of the region's macroeconomic fundamentals during 2009 and 2010 had a direct impact on the private equity (PE) industry. Fundraising reduced dramatically, the performance of portfolio companies suffered and valuations and liquidity reduced. The impact of this was compounded by social unrest and political instability which spread across a number of countries in the region.
However, during 2011 and the first quarter of 2012, the macroeconomic environment appeared to be improving. This 'recovery' was supported by an increase in oil prices, strong regional demographics, a revival in consumer spending and a degree of improved political stability. The private equity industry in the region has also started to show signs of recovery as the decline in the number of PE transactions bottomed out and fund raising recommenced (albeit at much lower levels than seen during the heydays of 2007 and 2008). It would appear that the industry's expectations have realigned and GPs in the Middle East are starting to approach the market with cautious optimism.
It is clear that the challenges of the last three years have forced the private equity industry to evolve. We have seen investment strategies with an increased focus on non-cyclical and growth sectors such as healthcare and infrastructure, and with a regional focus on those countries which possess strong macroeconomic fundamentals. This document is a collection of articles prepared by KPMG professionals from throughout the Middle East and seeks to provide an insight into a number of these key sectors and countries.