Private equity growth in the Middle East and North Africa or MENA region had been looking very attractive. Then came the war.
S&P Global analysis from last December noted how the region’s sovereign wealth funds and other investors have created a large capital pool for economic diversification away from fossil fuels, pulling in more outside investment.
According to a new PitchBook report, the MENA region has posted four consecutive years of private equity dealmaking. Deal value in the region rose to US$22.2 billion last year from $17.3 billion in 2024.
More than half the deal value was in information technology, with investments by KKR into Gulf Data Hub, CVC Capital Partners into Dream Games, and Permira into Property Finder.
Exits were also very healthy at some $19.3 billion, with $10.5 billion realised in the fourth quarter alone.
Only fundraising appears to buck the positive trend, declining from a peak of $38.5 billion in 2022 to just $6.6 billion last year. However, this followed a general dip in fundraising worldwide. Based on current deal volumes, there is little doubt that the region has enough dry powder to invest in the near term.
All that was before the commencement of hostilities in the Gulf.
“Investors are grappling with geopolitical risks, rising energy costs, and uncertainties surrounding inflation,” PitchBook says. “This situation has had mixed impacts on airlines, energy companies, technology firms, and defence stocks.”
It warns that “in private markets, the heightened hostility and geopolitical unrest are likely to significantly reduce the appetite for investment, particularly at the cross-border level, as nations prioritise national security”.
The report does highlight prospects for venture capital-backed defence companies and missile interception startups. Perhaps not an investment growth area that the world wants to see. It’s also worth noting that shariah principles forbid investing in the military and weapons sectors.
