Gulf Capital has earmarked investments of US$1 billion as the private equity firm takes advantage of low valuations.
“It is a great time to be investing because we are seeing more deal flow, more companies, better companies, controlling stakes at better valuations, so we think 2016 vintage is going to be very appealing,” said Karim El Solh, the chief executive.
He said the company is looking to close up to four deals this year.
As the traditional means of raising funding through bank financing and initial public offerings are constrained, more and more firms are approaching private equity firms to sell their assets or get cash.
Banks are shunning funding small and medium-sized companies amid a liquidity crunch, while capital markets remain soft.
“Bank financing is down substantially and the liquidity has eroded and the IPO market is shut and they [companies] are increasingly coming to us as a form of growth capital or monetisation – if they want to exit we can buy their businesses,” said Mr El Solh.
The $1 billion in dry powder, the term private equity firms use to describe money they have at their disposal for investment, comes mainly from two funds: a $750 million private equity fund and a $250m credit and mezzanine fund.
Gulf Capital, which has about $4bn in assets through 10 funds, is planning to invest in defensive sectors this year. These include health care, education, financial services, food and beverage and logistics, while it is shying away from energy and infrastructure.
The main focus of the private equity fund is the UAE, Saudi Arabia and Egypt, with a target ticket size of $50m to $100m.
The Abu Dhabi-based firm said on Tuesday it bought 100 per cent of Saudi Arabia’s Multibrands Trading, a food and beverage distributor with an annual turnover of more than $100m.
Gulf Capital is focusing on the Middle East, North Africa, Sub-Saharan Africa and Turkey for its credit and mezzanine fund. The target size for deals in these markets is $25m to $50m.
The company expects to exit up to two companies this year, mainly through sales.
“We think the IPO market is virtually shut,” said Mr El Solh. “We are much more excited about sales to strategic buyers from the industry to financial sales to other private equity firms.”
Gulf Capital has put off plans to sell shares to the public because of the weak UAE stock markets.
Follow The National’s Business section on Twitter