EMPEA Middle East and Africa report: a conversation with Mounir Guen
From the EMPEA Special Report: Private Equity in the Middle East and North Africa
"I Believe in the Region"
A Conversation with Mounir Guen, CEO of MVision Private Equity Advisers
You work with clients across developed and emerging markets, and you routinely meet with owners of capital around the world. Given your unique perspective, how do you view the MENA region?
The terminologies “MENA” and “MENASA” were created as a marketing exercise to introduce investors to a part of the world that was new to them, and to give it some form of geographic substance. The truth is that the sub-regions comprising the Middle East and North Africa are extremely different.
North Africa, which I would prefer to label as the Maghreb, has a rhythm of its own. While there are exceptions, most of the fundraising activity has been related to DFIs, such as DEG, EBRD, EIF, IFC and a number of other superb development finance institutions, all of which have done excellent work in supporting the establishment of some very good managers. Yet the Maghreb is still very nascent, with its own dynamics in terms of scalability, types of businesses, and the underlying drivers of the market. When combined with geopolitical issues in the region, these factors can inhibit large institutional capital flows into the market.
On the other hand, the activities one sees occurring in the Gulf region are attractive in their own right; investors like to be linked to the Gulf. The GPs are learning very quickly, and they’re getting very sophisticated. Interestingly, while the strategies of Gulf-based GPs sometimes touch Egypt—because of the historical links between that country and the Gulf—their investors don’t necessarily want them going much further west.
You make an interesting point about the historical connections between the Gulf and Egypt as a potential driver of deal flow. Has this translated into LPs in the Gulf serving as a source of capital for GPs in Egypt as well as the Levant and / or the Maghreb?
I think it’s a different story. The family groups from the Gulf countries have been active in the Maghreb and the Levant, and in fact, they are probably one of the main competitors to private equity fund managers in the region. Now, their activity is reliant upon their business plans and their liquidity, but they are—and they have been for as long as I can remember—very sophisticated investors and at a large scale. They have done quite well for themselves.
In addition to family groups, we also see firms embracing platform and investment holding companies, which operate like Business Development Companies to a certain degree. Is the traditional LP-GP structure the right model for the region?
It all depends on how you want to own and drive the value of the investment opportunity. Coming to substantial investors with a US$300 million—or even US$750 million—fund doesn’t always click, because these LPs are looking to deploy large amounts of capital. So some GPs have formed alliances with either substantial families or with corporates, and integrated them into their expansion plans.
What must MENA-focused GPs do to stand out when pitching institutional investors?
Having just come off of the experience personally, investors want to ensure alignment between the GP’s strategy and its performance capability. They want to make sure that the GP has executed through the full cycle—invested in interesting companies, and invested in them smartly, drove value in the businesses and generated a return profile in line with LPs’ expectations. It’s extremely important that the full circle has been accomplished. Investors also want to be comfortable with the quality of reporting and see the GP’s ability to construct a portfolio that offers diversification from the energy sector.
What is the biggest misperception that LPs have about the broader MENA region?
There is a general lack of familiarity with the region, and this manifests itself in the perception that these economies have a high reliance upon oil and gas; and so it looks like it is a highly concentrated risk. But the governments in this region, and the depth of their plans for economic diversification, have been very forward thinking. This is something people haven’t quite grasped yet. But I believe in the region—it is very robust and it offers LPs a number of very interesting investment opportunities.
The Special Report: Private Equity in the Middle East and North Africa provides a data-driven analysis of the broad range of private equity opportunities across the region—with a deep dive into the fundraising and investment dynamics in both the Middle East and North Africa. The publication, researched and written by EMPEA Consulting Services with support from EMPEA Member Firms, features a variety of stakeholder perspectives including local and global fund managers, institutional investors, law firms, placement agents, and local venture capital and private equity associations. The report also features case studies that demonstrate the critical role that private capital can play in building better businesses and driving private sector development.