Across the region’s private equity landscape, there are a large number of financiers, whose mixture of know-how and ability to gather capital from a solid investor base introduced new ideas of efficiency to some of the region’s most successful firms, including those whose sights are set on becoming regional champions.
When Executive had the chance to sit down with the co-heads of Investcorp’s Gulf Growth Capital (GGC) Fund, Azmat Taufique and Christophe de Mahieu, it reached the crème de la crème of the region’s private equity scene, the philosopher-financiers of the industry.
Investcorp began private equity operations in 1982 in the Gulf, and has since evolved to include a host of other assets. The firm’s latest GGC Fund is a return to its home turf, in an effort to harness the group’s synergy and experience with local partners — an essential ingredient to any regional private equity mix — in spotting deals and acting on those with the best chances for success. The particular focus of the fund is to invest in and improve greenfield projects and buyout opportunities in medium-sized firms, the newest foray of the firm. De Mahieu said the fund has “deployed more than $35 billion of the Gulf’s capital across the world.”
Alignment
With more than $13 billion in assets and an investor base of 1,400, the GGC Fund should not lack deal flow. De Mahieu said that “[Investcorp] combines its distinctive capabilities of raising funds, with its trusted investors in the Gulf and across the world, while bringing its well-established private equity capabilities built over time in the West to make private equity investments in the Gulf and by extension across the Middle East.” According to Taufique the investor base of contacts are not just investors, “but genuine partners in the region,” to whom Investcorp looks “for ideas and for deal flow.”
The relationships with the investor base of partners and profiteers from successful deals are not the only relationships the firm is mindful of. Taufique described the firm’s cooperation with management best when he explained the host of global experience Investcorp brings to the table. Especially as Investcorp is “particularly adept at understanding what the potential conflicts are and mitigating them, creating alignment and structures and working with the teams over a period of time to enhance value that would be of interest to everyone concerned. In this sense, we would like to think that we are better at handling this.”
To enhance investments and ensure that Investcorp can achieve positive results with firms, according to de Mahieu, “there is often an alignment phase with the owner and management of a company before we launch the full due diligence process.” He explained that, “during this alignment phase, we spend a lot of time with the existing owner and management to align ourselves around the vision, the strategy, and the contribution of every party, including Investcorp, to create significantly more value. When alignment is reached, we go into the due diligence. After the due diligence, if the transaction is consummated, we work together, we change the governance, support the management, inject new capital when required and bring our operational capabilities where agreed.”
Foreign capital
Taufique noted the strong regional pull in attracting foreign capital, as seen through the FDI number for Saudi Arabia and the UAE which are both “beyond the charts. And so for a country that has a great capital surplus to attract that sort of foreign investment, there must be something positive going on.”
Within the kingdom, Taufique believes that few associate Saudi Arabia with being one of the fastest reforming economies in the world, because “there are perceptions of other constraints of different kinds, but in terms of the economic structure, there seems to be a momentum for reform, which is being recognized by institutions like the World Bank, but also by private investors.”
Future strategy
Taufique opined that “there are many more possibilities for growth capital equity investing here today as opposed to investing in existing companies and tweaking the edges. And that is the focus of many private equity players now, because that is where the opportunities are, but as things progress, you will find more and more of the region evolving into what you have seen in North America.”
With these dynamics in mind, “as the industry matures, the intermediaries will start playing a more active role as they build their expertise in the region and they build their own relationships,” which, according to Taufique, will “see a bigger flow of deals coming from the intermediaries and that will make the industry more efficient. We know what we do best and that is to invest and enhance value.”
