Accelerated adoption of technology and the shift away from fossil fuel dependence have helped to attract a record level of private equity (PE) and venture capital investment in the Mena region, according to ratings agency S&P.
Figures from S&P Global Market Intelligence data show that deal value in the region for the first half of the year reached US$9.72 billion, up from $9.55 billion for the same period in 2021 and 66% up on the first half of 2020.
There has also been a rise in the number of deals (410), the highest number for a six-month period since 2018.
In that four-year period, the majority of PE investment has been focused on the tech, media and telecom sectors, with 1,554 deals worth $32.42 billion.
According to S&P’s report, untapped markets and rising consumer demand have attracted fintechs to the region, many of which have been backed by PE investors.
“The outsized role of technology-focused deal flow reflects the significant potential that disruptive companies have when it comes to making an impact in the region’s economy,” said Cameron Joyce, senior vice president and deputy head of research insights at Preqin.
Half of the ten largest PE and VC deals in the region’s tech sector were conducted in Israel, the most valuable of which was the $497 million acquisition of Israeli cybersecurity deal by Turn/River Capital.
The largest deal overall in the region so far this year was the proposed purchase of a 50% stake in UAE-based Emirates District Cooling company, for which VC firm Actis paid nearly $1 billion.
However, despite the growth of activity in the first half of the year, the number of deals in the latter half has slowed down, with just over $2 billion recorded since July.
“Global macroeconomic trends are likely to weigh on activity in the near term as financial markets digest the impact of tightening monetary conditions around the world,” said Joyce. “The strengthening dollar is putting additional pressure on emerging economies at a time when investor risk appetite has been declining.”
©2022 funds global mena