VC-backed deals in Saudi Arabia hit 10-year high at $13 mln

Venture capital-backed buyout deals in Saudi Arabia have reached $13 million, the highest level seen in 10 years, according to figures compiled exclusively for Argaam by Preqin, a global alternative assets data provider.

“The $13 million in deals recorded in 2018 YTD (Sept. 4, 2018) is the highest we’ve seen in 10 years,” a Preqin spokesperson told Argaam.

Private equity-backed buyout deals too have crossed the 2017 level in the Kingdom, with the aggregate deal value hittinh $267 million YTD, compared to just $143 million recorded in 2017.

The PE-backed deal value is also strongly expected to surpass 2016 level ($270 million) and is on course to hitting the 2-year high level.

“With $267 million already recorded in 2018 so far, it is very possible that deal activity would rise above $270 million if there are any more deals recorded. It has already surpassed 2017’s level,” the spokesperson added.

There are currently six Saudi Arabia-based funds in market seeking commitments from investors, and collectively they are seeking $1.5 billion in capital. The bulk of this comes from the ICD Africa Infrastructure Fund I, which is seeking $1 billion, Preqin data show.

“It is difficult to predict how activity will develop going forward – funds coming to market seeking capital does not necessarily mean that they will secure funding and reach a final close. However, it is encouraging that managers perceive enough investor interest to raise funds as large as $1 billion, and given that no Saudi Arabia-based infrastructure funds have closed in the past it suggests that the market is developing,” the spokesperson said.

Terming the effects of the recent Abraaj issue on the region’s private equity fundraising as “difficult to quantify,” the spokesperson said, “Reputational damage incurred by one firm does not necessarily impact investors’ perception of another similar firm, but may dent investor confidence in the region as a whole.”

“That said, private capital fundraising processes are long-term compared to many financial products: fundraising may last for well over a year, and a private equity fund typically locks up investor capital for 10 years. As such, news breaking within the past few months may take some time to have any visible effect on the market, if it ever does.”  

Overall, in the Middle East, the aggregate deal value of VC-backed deals has been $144 million YTD.

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Write to sunil.kumar@argaamplus.com