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24 May 2024

Private equity firms target family-owned businesses

By Nitin Nambiar



With the increase in number of businesses joining the IPO wave to capitalise on the liquidity in the region, private equity firms are targeting pre-IPO investments in family-owned businesses, senior industry executives said.

“As concerns about oversubscription in IPOs grows, investors in the region are having to buy stocks at higher levels post-listing. Private equity funds offer an alternative route for investing in the company prior to its offering,” said Alwaleed Abdelrahman, senior vice-president at Abu Dhabi Investment Company’s private equity division.

“What we are seeing is more and more family-owned businesses in the Middle East looking to align with private equity firms at a pre-IPO stage,” Narayanan Ramachandran, partner at KPMG, said.

Speaking to Emirates Business on the sidelines of a private equity conference in Dubai yesterday, Ramachandran said family enterprises stood to gain from private equity partnership at the pre-IPO stage.
“Private equity firms are able to bring knowledge of capital, certain independence to the board and set strategic directions beyond the domestic markets, which enables these family-owned companies to grow their market and thereby bring in more value to the company when it does decide to float an IPO.”

The region has seen increasing private equity investment in family businesses at the pre-IPO stage. In 2005, Saudi Arabia’s Amwal Al Khaleej bought a 23.5 per cent stake in Damas Jewellery, a 100 per cent family-owned enterprise until then.

Amwal Al Khaleej later bought a minority stake in UAE’s Dana Gas and Saudi Arabia’s Al Tayyar Travel before it launched its IPO.

Dubai’s Abraaj Capital bought a 10 per cent stake in Arabtec in 2005 and the IDB Infrastructure Fund bought a 38 per cent stake in UAE’s AES Oasis as a pre-IPO investment.