Emerging market private equity deals rise in first half 2011

Reuters, Thursday 25 Aug 2011

Despite global rise, fundraising and deal volumes slump in the Middle East, led by Egypt where most of the activity previously took place

Egypt industry
Egyptian transport and industry: both in need of foreign investment, claimed experts in 2010 (Photo: Reuters)

Global emerging market private equity deal volume rose by 11 per cent to US$14.1 billion in the first half of 2011, and fundraising doubled to $22.6 billion, the Emerging Markets Private Equity Association said on Thursday.

Emerging market private equity deals dropped sharply during the global financial crisis, totalling $28.8 billion in 2010 compared with $47.8 billion in 2008, the association said in a statement.

But the expansion of fund-raising suggests deal volumes are likely to rise further.

Fundraising in the first half almost matched full-year 2010 fundraising of $23.5 billion and could reach $40 billion or more this year, EMPEA said.

"Provided the valuations of the markets for which the capital is raised are deemed reasonable, we would expect a pretty significant drawdown of the capital over the following 18 to 36 months," said Jennifer Choi, vice president of industry and external affairs at EMPEA in Washington.

China's share of the fundraising total rose to 45 per cent, its highest level to date, while India and Brazil are also making up an increasing proportion of fundraising, EMPEA said. China and India accounted for 68 per cent of the total deal investment in the first half.

Investments took place across 54 countries in the first half, EMPEA added, including frontier markets such as Honduras, Laos, Madagascar, Mongolia and Uruguay.

Globally, the largest number of emerging market private equity deals were done in the industrials and manufacturing sector, followed by the consumer, services and technology sectors.

But fundraising and deal volumes dropped sharply in the Middle East and North Africa (MENA) region, which has been hit by Arab spring uprisings.

Volumes may not pick up in the region any time soon.

"It remains to be seen what will happen in elections in Egypt, and within North Africa, Egypt was where most of the activity was taking place," Choi said.

Unrest in the region has continued into the second half, with fighting still going on in Tripoli, days after rebel forces overran Muammar Gaddafi's headquarters.

"There has never been much private equity in Libya, but maybe by 2012-2013 it could become a really active market," Choi said.

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