When I met Fady Michel Abouchalache, CEO of the $27 billion Paris-based wealth management and private equity firm Quilvest in 2012, he was pessimistic about the prospects for private equity in the Middle East. Not anymore, however, since he is placing a bet — a large $150 million bet — on a project in the region.
While Abouchalache has always kept an eye on investment opportunities in the region — a natural inclination given that he spent the first 18 years of his life in Lebanon — this year he has decided to pursue one of these investment opportunities, the second time he has ventured in the Middle East.
After unsuccessfully attempting to pioneer private equity in the Middle East in 1998 by launching a Beirut-based private equity firm, Abouchalache quickly landed a job at Quilvest and eventually became the CEO of the investor group. However, he has not given up on the Middle East. According to Abouchalache, it is a region of the world which has “a solid macroeconomic backdrop with positive indicators — from GDP growth to surplus spending to businesses both consolidating and trying to be managed at European and US standards.”
The new direction
But this is the old story. What has changed now? Having studied the market for over a year, Quilvest will not be acquiring stakes in established private companies with the aim of exiting after a couple of years — the typical private equity model — but will instead be building a platform from scratch. The bets will not be on speedy exits or capital markets (not the region’s forte) but instead on consolidating industries, spinning off family businesses and taking companies to a regional level.
Headquartered in Dubai, the first platform that the PE firm is developing will be in the food and beverage (F&B) sector. Headed by a Lebanese CEO whose name was not disclosed, it is ultimately expected to be a $1 billion revenue company with 300 points of sale in up to seven countries throughout the Middle East and North Africa within about ten years.
Abouchalache, who will be chairing the board, was not able to disclose much information on the upcoming platform, which is due to launch in the next few weeks. All that he could share with us at this point was that the venture is being set up in partnership with seven established family offices and groups from the region, which invested two-thirds of the project’s cost. There are four from Saudi Arabia, one from Lebanon, one from the United Arab Emirates and one from a Jordan/US based group. The remaining funds are coming from Quilvest and its team of investment professionals (who own up to 10 percent of the project) as well as a subset of the firm’s global investors.
Abouchalache’s ultimate goal with this company is to consolidate the F&B sector. “The platform we are creating has a mandate to look at companies to buy them,” he says. His confidence in this company’s ultimate success stems from the stellar performance of the Mexican discount retailer BBB. Established 11 years ago and headed by Lebanese CEO Anthony Hatoum, BBB has received backing from Quilvest to the tune of $50 million since its inception; the retailer now has 550 stores with 4,000 employees in Mexico. “It is now in a cruising altitude, opening 100 stores per year,” says Abouchalache, adding, “We are trying to replicate our success in Mexico — in a different space but the same adventure.”
More to come
After a successful fundraising round for this Middle Eastern adventure — one and a half times oversubscribed — Quilvest is studying other sectors in the region to deploy its expertise in, by early to mid 2015. The approach will be the same as that of the first one, with the following remaining at its core: build from scratch with a long term perspective, make the business more regional, adopt international standards and consolidate the industry.
The Middle East has always been an important region for Quilvest. Of the $1.3 billion raised last year, one third was sourced from the region. But this time, it is taking on a more pivotal role for the firm, not just as a source of funds but also as a revenue generator with incredible growth potential.
“The Middle East is set for fabulous growth… absent major political shocks,” says Abouchalache. Betting on the lack of political distress in the region calls for a big appetite for risk. Let’s hope Quilvest’s past performance is an indicator of its future results.