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Dubai
based Abraaj Capital has quickly become one of the largest
private equity firms in the region comprising the Middle
East, North Africa, and South Asia (SAMENA.) It is breaking
new grounds and setting high standards of professionalism
in Private Equity management.
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very name comes from the Arabic word for Tower,
or Burj. In the recent past it has become the embodiment
of this name by becoming a regional powerhouse in
the private equity arena and thereby reaching the
heights indicated in its name.
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The
company manages a number of funds that focus on different
sectors of the market. These include the $116 million
Abraaj Buyout Fund, the $32.55 million Abraaj Special
Opportunities Fund, the recently closed Abraaj Real
Estate Fund which was well oversubscribed, and a proposed
Abraaj Buyout Fund II with a target size of $500 million.
The
company has built a solid track record of investments
in companies across the region. These include
Aramex International, ONIC Holdings of Oman,
Amwal Capital of Qatar, Spinneys of Lebanon,
BMA Capital Management of Pakistan, and Septech
Emirates. The sector diversity of these investments
covers the gamut from supermarket chains to
sewage treatment and the capital markets. In
the past 8-9 years the company has produced
a track record of robust returns averaging with
an equity IRR of 35%.
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Mr.
Arif Masood Naqvi, Executive
Vice-Chairman & CEO, Abraaj Capital
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Gross
capital gains on its profitable ventures (which outnumber
losses almost 4 to 1 have ranged from 3% to 242%.)
Private
equity emerges
According
to Doug Casey, author of best seller Strategic Investing
and renowned international speculator in the stock,
bond, commodity, and real estate markets around the
world, Dubai is a city to keep your eye on. Abraaj is
one of the reasons for Casey's optimism. The growth
of the capital markets, both conventional and Islamic,
as well as the proliferation of the number of various
investment firms is giving the business environment
a pass to becoming the regional hub for trade and finance
in a major way.
Part
of this trend is being developed by the significant
number of private equity and venture capital firms who
bring business expertise and operational excellence
to the markets and who look for hidden opportunities
in hitherto unknown companies or who seek to take lesser
known ventures to the next level. Such companies include
Injazat, MENAVEST, Istithmaar, and the focus of this
article Abraaj Capital.
For
the uninitiated the simplest definition of private equity
can be thought of as "equity capital that is invested
in a private company". So basically, private equity
refers to money channeled from investors, individuals,
families, or institutions, into companies that are not
yet quoted on a stock market. Private equity investment
structures can be quite complex and often involve the
participation of managers familiar with the company's
inner workings as well as significant amounts of capital
and leverage.
A
unique rationale
Abraaj's
rationale for investing in the region is unique. Like
other private equity/VC firms their ultimate aim is
to provide "superior risk adjusted returns" to their
investors. But what adds to this basic mission statement
is the idea that Abraaj seeks to play a role as an agent
of "economic change" in the market. Indeed, much of
their thinking process is predicated on Abraaj's estimates
of what the economic picture of the Middle East and
surrounding regions will be in the near future. A recent
report jointly produced by Abraaj and Start Consult
devotes a considerable section to discussing the job
creation requirements in the region given the current
future determined population growth. Based on current
trends in economic development and liberalization, demographics,
and information technology their belief is that the
time is now for both companies and countries to capitalize
for the sake of superior returns as well as to keep
themselves competitive in the rapidly changing environment.
A
dedicated team
At
the heart of Abraaj's efforts are the Executive Vice
Chairman and CEO, Arif Masood Naqvi, and his team of
dedicated professionals. Mr. Naqvi believes that the
Middle East is now at an "inflection point" just as
it was during the era of the World Wars in the 20th
century.
The
difference is that change then took place through
military might while today it will take place
at the social and economic level. The key driver
for this change comes from the business world
- and in particular the creation and development
of a burgeoning entrepreneurial movement.
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| Naqvi
sees a coming era of increased privatization
of government industries in which private
equity firms at large will provide a "natural
pool of interested buyers". |
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Defining
Future Trends.
Naqvi
is extremely optimistic about the opportunities presented
by the region for diverse investments capped by robust
returns. The main issue, in his opinion, that lies at
the heart of the underdevelopment of the region is the
"perception gap" that has been to date inadequately
addressed by businesses and governments in the region.
Naqvi sees macro-economic conditions in the broader
region improving over the long term resulting in improved
regulatory structures and the concomitant development
of the capital markets. But in order to guide such change
effectively he calls on practitioners from all areas
of focus - banking, private equity, government, and
advisory - to concentrate on bringing the region forward.
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And tapping Opportunities for Today and Tomorrow
Mr.
Naqvi is constantly using opportunities to articulate
Abraaj's outlook and its key methodologies. In a speech
on March 7th, 2005 at the Private Equity International
Middle East Forum, whose lead sponsor was Abraaj Capital,
Naqvi offered that private equity would lead "a virtuous
circle of improvement" in the region. Naqvi also sees
a coming era of increased privatization of government
industries in which private equity firms at large will
provide a "natural pool of interested buyers". Indeed,
in his opinion, private equity firms will be drivers
of the development of capital markets within the region
as they operate at the nexus between investors and government/capital
markets.
Capitalizing
on opportunity does not lead Abraaj to concentrate on
specific sectors for investment. As mentioned above
the company has invested in a number of diverse enterprises.
This diverse pool of investment is based on Abraaj's
understanding that the current lack of privatization
on the state owned enterprise front is a "blessing in
disguise". The private equity industry is in effect
"forced" to focus on alternate sectors in an effort
to find superior wealth creation opportunities. In a
region where most capital has found its way into the
energy sector private equity firms like Abraaj help
repatriated capital to find hitherto unknown and untapped
areas of hidden wealth.
Abraaj's
Heights
Abraaj
continues to scale to new heights. One of its latest
achievements has been its partnership with BMA Capital
Management of Pakistan and their joint launching of
the BMA Pakistan Government Bond Index (BMA-PGBI) to
track a basket of all outstanding Pakistan government
bonds with a maturity of greater than one year. It has
announced recently the launch of its Abraaj Buyout Fund
II and has also entered a bid with the Privatization
Commission of Pakistan for the proposed sale of Pakistan
State Oil (PSO). With such a robust approach we look
forward to Abraaj creating new heights for the broader
private equity community in the SAMENA region.
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Learnings: |
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Private
equity refers to money channeled from
investors, individual, family, or
institutions, into companies that
are not yet quoted on a stock market.
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Private
equity and venture capital firms bring
business expertise and operational
excellence to the markets and look
for hidden opportunities in hitherto
unknown companies or who seek to take
lesser known ventures to the next
level
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Abraaj
seeks to play a role as an agent of
"economic change" in the market. The
key driver for change comes from the
business world - and in particular the
creation and development of a burgeoning
entrepreneurial movement. |
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