Mideast private equity recovery seen in ’12

The Middle East private equity industry has been hard hit by the uncertain political environment since the start of the Arab spring, but there’s still the potential for new deals even in tough markets such as Egypt and Iraq, according to the private equity arm of UK’s Standard Chartered.

Standard Chartered expects market conditions to improve next year and plans to invest up to $200mn in new private equity deals in the Middle East and North Africa region during 2012, according to Taimoor Labib, the bank’s private equity head for the Middle East and North Africa. The bank also expects to shift its focus from the established markets of the Gulf Co-operation Council countries, to Egypt and Iraq.

“Markets are very tough and we still have uncertainties and difficult business environment in the short term. But the Arab Spring will unleash talent and this is how you create great economies,” Labib told Zawya Dow Jones in an interview. He said the $200mn the company plans to invest in 2012 would take the form of equity and mezzanine finance.

Only 24 private equity and venture capital deals were completed in the Middle East in 2010, down from 46 a year earlier, according to a recent report by the Mena Private Equity Association, as the market continued to suffer from the aftermath of the global financial crisis.

Figures for this year aren’t yet available, but the Middle East private equity industry was dealt another blow by the loss of confidence and the market volatility caused by the regional political upheavals that were unleashed by the toppling of the regimes in Tunisia and Egypt.

Private equity funds will have to decide whether to return money to investors, or wait for new deals while managing their existing investments, analysts say.

But Labib sees opportunities in Egypt once the uncertainty over the parliamentary and presidential elections planned for later this year has cleared. And Iraq offers scope for new deals due to the huge infrastructure projects the country is planning.

“Egypt is a great economy with a population of more than 80mn. The post election period is very promising,” Labib said, adding that Iraq is a country under construction with huge infrastructure investment plans lined up.