MENA Private Equity Fund
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Transcript of MENA Private Equity Fund
1
Arab Private Equity Industry
Prepared for the AVCA 5th Conference in Kenya 6 – 9 November 2005
2
I. Who we are?
Agenda
II. Private Equity in the Arab World
III. Private Equity in Egypt
IV. Challenges
3
Who we are?I.
4
EFG-Hermes has 400+ employees, up from 30 in 1994
Offices in Cairo, Dubai (2002) and Riyadh (2005)
Listed on the London and Cairo Stock Exchanges with a Market Cap of $1,053Mn (30.Oct.05)
Brokerage executed 40% of all transactions on CSE and UAE arm $211Mn in April alone
Investment Banking raised $ 4.1Bn in equity transactions and advised $ 11Bn M&A transactions
Asset Management manages 5 local and 3 off-shore funds with a total NAV of $ 750Mn
Securities Brokerage
Investment Banking
Asset Management
Private Equity
EFG-Hermes Egypt’s Premier investment banking firm
Structure
Who we Are
5
Commercial International Investment Company
1994
US$ 189 Million
EFG-Hermes
US $ 54 Million
EFG-Hermes
Horus Private Equity Fund1997
US $ 25 Million
EFG-Hermes
Middle East Technology Fund2000
US$ 9 Million
EFG-Hermes
Technology Development Fund2004
US $ 4.5 Million
EFG-Hermes
Jordan IT Fund2000
Aggregate funds under managements US$ 543Mn (incl. US$ 61Mn proprietary investments)
EFG-Hermes Private Equity5 funds under management plus 2 closing in 2005
US $ 50 Million
EFG-Hermes
Horus Food & Agribusiness Fund2005
US $ 155 Million
EFG-Hermes
Horus Private Equity Fund II
2005
ClosingClosing
6
II. Private Equity in the Arab World
7
MENA Economic & Market Profile
Qatar4%
Bahrain2%
Oman4%
Morocco9%
Tunisia5%
Saudi Arabia37%
UAE13%
Palestine1%
Lebanon3%Jordan
2%
Kuwait8%
Egypt12%
GDP $ 619Bn Market Cap (28.Oct.05)
Market Cap $ 1,183Bn (192% of GDP)Roughly that of Spain
589
218
122
98
54
35
27
18
14
6
3
249%
255%
250%
417%
70%
318%
50%
184%
59%
34%
10%
Saudi Arabia
UAE
Kuwait
Qatar
Egypt
Jordan
Morocco
Bahrain
Oman
Lebanon
Tunisia
US$ BnMarket Cap/GDP
8
MENA Stock Market Trends Significant growth in Regional Indices
Source: Zawya, 29 October 2005
Drivers: oil prices & market deregulation
Non-GCC Countries Market TrendsGCC Countries Market Trends
Drivers: economic reform and corporate profits
Abbreviations: ADI (Abu Dhabi), QSI (Qatar), MSI (Oman), SSI (Saudi Arabia), BAX (Bahrain), KUSI (Kuwait), MASI (Morocco), AMMAN (Jordan), HRMS (Egypt) and BLSI (Lebanon)
9
MENA Private Equity Regional PE 2005
Source: Private Equity Monitor, EHPE
Bahrain, 17.80
Emirates, 26.00
Kuwait, 21.73
Oman, 18.87
Qatar, 34.30
Saudi Arabia, 36.40
Egypt, 17.19
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
10
Source: EHPE, Zawya, October 2005
MENA Private Equity Players Sample of funds raised or being raised in 2005
Note: Does not include Citadel, an Egyptian buyouts boutique
Status Date Fund name Fund Manager Investment Focus Country Fund Size US$
Mn
Announced 2005 GCC Energy Fund L.P.
GCC Energy Fund Managers Ltd
Buyouts in the energy sector GCC 300
Fund Raising 2005 Jordan Dubai Capital
Dubai International Capital
Private Equity and Development projects
Jordan 272
Fund Raising 2005 Markaz Energy Fund
Markaz Buyouts, focus on energy sector GCC 165
Closing 2005 Horus Private Equity II
EHPE Buyouts, with no sector focus Egypt 155
Closed 2005 Oasis Oasis Buyouts, with no sector focus Egypt 150
Closing 2005 Horus Food & Agri
EHPE Buyouts, focus on agribusiness Egypt 50
Investing 2005 NTEC NTEC Venture capital, early and late stages, in technology sector
Kuwait 330
Investing 2005 Buyout Fund II Abraaj Capital Buyouts, with no sector focus MENA 300
Investing 2005 The Pre-IPO Fund
Global Investment House
Buyouts, in the IPO or Pre-IPO stages
GCC 300
Investing 2005 SHUAA Partners Fund I, L.P.
Shuaa Partners Buyouts, with no sector focus MENA 200
11
MENA Private Equity PE Industry Size $ 3.4Bn (< 1% of GDP)
Industry grew at 41% CAGR over past 5 years and projected to grow at 25% in next 3 years $ 2.2Bn raised up to 2004 with > $ 3.4Bn raised or being raised in 2005
Source: Private Equity Monitor, EHPE
MENA Funds Raised
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1994 1997 1998 2000 2001 2002 2003 2004 2005
Fund Inception Year
US
$ M
illio
n
12
Source: EHPE, Zawya, October 2005
Profiles of MENA PE Funds 60 Funds (1/3rd Buyouts by value and volume)
2,190
1,281
757
601
1,123
20
2
12
9
17
0
500
1,000
1,500
2,000
2,500
Buyouts Infrastructure Technology Real Estate Others
Valu
e U
S$ M
n
0
5
10
15
20
25
Vo
lum
e
Funds by investment focus
13
Source: EHPE, Zawya, October 2005
Fund focus (All funds before 2005) Fund focus 2005
Trends in MENA PE Funds More focused on Buyouts
10
5
9
1
9
0
200
400
600
800
1,000
1,200
Buyouts Real Estate Technology Infrastructure Others
Investment Focus
Val
ue
0
2
4
6
8
10
12
Vo
lum
e
10
4
3
1
8
0
200
400
600
800
1,000
1,200
1,400
1,600
Buyouts Real Estate Technology Infrastructure Others
Investment Focus
Valu
e
0
2
4
6
8
10
12
Vo
lum
e
$ Mn $ Mn
14
PE Country Focus
Egypt, 3
Kuwait, 2
Jordan, 1
Lebanon, 1
U.A.E., 1
MENA, 10
GCC, 9
Levant, 4
Geographic Focus of Fund 2005 and 2006 PE Funds
Shift in the geographic focus of funds. Prior to 2005, many funds were chasing opportunities in Levant and Egypt.
Today, the GCC and MENA, with its buyouts economies, is the focus of close to half of the funds being raised.
15
MENA Private Equity Trends Wave of Funds being raised is different
Median fund sizes increased from US$ 55Mn to US$ 150Mn
Evolution of Mega funds – NTEC US$ 330Mn, GCC Energy Fund US$ 300Mn
Investment range increased to attract bigger deal sizes
More focus on funds with buyout profiles
More focus on growth and late stage rather than seed, start ups, and SMEs
Targeting Pre-IPO and trade sale
Adopting int’l industry reporting & valuation standards
Technology funds are quickly losing attraction, while energy is gaining momentum
Shift in the geographic focus of funds
16
Private Equity in EgyptIII.
17
Private Equity fund raising trends
0
100
200
300
400
500
600
700
800
900
Ju
l-8
9
Ja
n-9
0
Ju
l-9
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Ja
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Ju
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l-9
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Ju
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l-9
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n-9
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Ju
l-9
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9
Ju
l-9
9
Ja
n-0
0
Ju
l-0
0
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n-0
1
Ju
l-0
1
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n-0
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l-0
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n-0
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Ju
l-0
3
Ja
n-0
4
Herm es Financial Indes (US$) GDP Grow th (Basis Points , %100) Cicle
Recession Recovery Boom Slowdown Recession Recovery State of the Economy
Egypt Completed 1st Cycle & going thru 2ndPrivate Equity riding the Cycle
18
Aggregate realizations 68
Aggregate proceeds US$ 504Mn(2000-2004)
No. of realizations by sector
Realizations routesSummary
Trading, 19, 28%
Buyback, 30, 44%
Strategic , 14, 21%
IPO, 5, 7%
1413
11
7
43 3 3 3 3 3
1
0
2
4
6
8
10
12
14
16
Egypt PE ExitsEHPE Realizations (aggregate all funds)
19
Private Equity Players in Egypt2005 PE Funds with buyout focus
Note: Does not include Citadel, an Egyptian buyouts boutique
Private Equity in Egypt
Status Fund Name Manager Investment Focus Inception Year
Size of Fund ($ MN)
Investing Oasis Oasis Buyouts, no sector focus 2005 150 Investing Turnaround Fund CIB Buyouts, no sector focus 2005 50 Closing Horus II EHPE Buyouts, no sector focus 2005 155 Closing Horus Agri EHPE Buyouts, agro sector 2005 50 Fund raising Direct Invest. Fund II Concord Buyouts, no sector focus 2005 100 Total 2005 505
Investing TDF EHPE Venture capital, IT sector focus 2004 9 Investing IT Ventures IT Ventures Venture capital, IT sector focus 2003 150 Fully vested Tech VC Fund Concord Venture capital, IT sector focus 2000 30 Fully vested Direct Invest. Fund I Concord Balanced, no sector focus 1998 35 Investing EK Holding EK Holding Balanced, no sector focus 1997 120 Fully vested Horus I EHPE Balanced, no sector focus 1997 54 Liquidating EgyCap Delta Balanced, no sector focus 1997 13 Fully vested ADI ADI Balanced, no sector focus 1995 50 Fully vested CIIC EHPE Balanced, no sector focus 1994 189 Total, pre-2005 650
Total Funds 1,155
20
Private Equity in EgyptUS$ 1.2 billion in funds under management (<1% of GDP)
• Egypt had 9 PE funds managing $ 650Mn up to year-end 2004
• In 2005, 5 new funds were established targeting $ 505Mn ($ 405Mn or 80% raised to date)
Egypt Funds Raised
0
50100
150
200250
300
350
400450
500
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
US$ Mn
Source: EHPE
21
Egypt Private Equity Trends SMEs PE Financing
10% of 2005 PE investments in Egypt are available for financing SMEs Majority of the Egyptian business are SMEs SMEs financing available totals $ 59Mn Sector Specific IT ($ 9Mn) and Food and Agri ($ 50Mn)
PE financing for SMEs in Egypt
Buyouts, no sector focus
91%
SMEs9%
22
Egypt Private Equity Trends Larger funds with buyout perspective
Median fund sizes increased from $ 50Mn to $ 100Mn
Investment range increased (Horus I ceiling $ 10Mn verses $ 30Mn Horus II)
Majority control less emphasis on controlled minority
Focus on recapitalization, turnarounds and privatizations
Growth and late stages with less on start ups and SMEs
Size important for potential IPO
Building management teams to implement value-added strategy
23
ChallengesIV.
24
Challenges facing PE Industry EHPE Experience in the Region
Lack of PE financing for SMEs and Startups Int’l institutions not interested & local institutions will participate only if they do Difficult to exit
Regulatory Environment Setting up local funds Enforcing shareholder agreements Codification of law Foreign Ownership
Due-diligence Law firms and Auditors are catching up to develop
Human Capital PE requires a special reservoir of high caliber human capital
Investment Support Lack of strong management to implement investment strategy
Exit Mechanisms Volatile Capital Market in the region
25
Arab Private Equity Association APEA Core Mission
Encourage cooperation between members in terms of providing resources, tools, and ensuring the fair pricing and high quality of materials in such a transaction
Enhance deal flow between member companies Encourage the exchange of information and experience between
members Increase opportunities for Cross-Country Investment Bringing PE concerns to the attention of governments and private
investors Support for research, business information, economic feasibility studies,
and statistics Providing the means for contacting Arab and foreign research groups Afford training, and knowledge for industry professionals on the technical,
financial, legal aspects of Direct Investments as well as Venture Capital Organizing conferences, workshops and networking opportunities
26
EFG-Hermes Private Equity
9 Mohamed Fahmy Street, 14th Floor
Garden City
Cairo, Egypt.
Tel: (202) 7923875/6/7
Fax: (202)
Email: ciic.com.eg