Click here to close now.

SYS-CON MEDIA Authors: Elizabeth White, Peter Silva, Glenn Rossman, Kevin Jackson, Michael Jannery

News Feed Item

Private Equity as Agent of Change in MENA

DUBAI, UAE, August 7, 2014 /PRNewswire/ --

White paper published by MBA graduates of Harvard Business School in collaboration with Growthgate Capital exposes myths surrounding PE 

Following a period of contraction and consolidation, the private equity (PE) industry in the MENA region is beginning to show signs of a recovery, both in terms of deal volume and size. However, PE's challenge has been the perception that PE investors focus excessively on short-term results, and have a negative effect on job creation and the long-term health of the economies in which they operate.

     (Logo: http://photos.prnewswire.com/prnh/20140321/675211 )

The white paper published by MBA graduates of Harvard Business School (HBS) in collaboration with the GCC-based PE firm Growthgate Capital, seeks to debunk some of the myths surrounding PE, by reviewing how local and international PE firms have been able to add considerable value to portfolio companies and the broader economy. The analysis of this paper suggests that many of the beliefs surrounding the impact of PE firms, such as job destruction and an excessive focus on short-term profitability, do not hold.

The white paper demonstrates that PE funds globally have improved performance of target companies by reducing constraints for companies in need of external capital, focusing on investments in innovation, increasing capital expenditures, and instilling better corporate governance and operational practices.

Referring to a number of recent academic studies, the paper also confirms that companies acquired by PE funds grow significantly more than comparable firms in terms of sales and capital employed, and often in employment. For instance, a comprehensive study using data from 3,200 deals in the United States reveals that on average, private equity buyouts raise firm productivity by over 2% in the two years after the buyout.[1] Across both good (2005-2007) and bad times (2008-2012), PE makes a net contribution to employment growth. The study also shows that PE increases not only employment but also labor productivity as it increased by over 7% a year from the time PE acquired companies in the sample to the point of exit.[2]

Another study, using data from 839 European deals over 1994-2004, shows that between the four years preceding the transaction, and the four subsequent years, employment, assets, and sales growth of PE targets are, respectively, 18%, 12%, and 12% higher than the non-PE backed firms.[3] These transactions were largely growth equity deals rather than the leveraged buyouts that dominate the U.S. market, and those may be more representative of the PE transactions that dominate emerging market regions such as MENA.

--------------------------------------------------

1. Davis, Haltiwanger, Hanley Jarmin, Lerner, Miranda, 2014, "Private Equity, Jobs, and Productivity" (American Economic Review).

2. Ernst & Young,  2013, "Myths and challenges: How do private equity investors create value? A study of 2012 European exits"

3. Boucly, Sraer, Thesmar, 2011, "Growth LBOs" (Journal of Financial Economics)

Furthermore, the white paper tracks the evolution of the PE asset class in the MENA region. While the PE landscape in the region has been challenging, LPs have now consolidated their bets on 10-15 PE firms that have demonstrated an ability to generate superior returns. PE firms that continue to innovate in terms of their funding model and deal sourcing and build portfolio operation capabilities are likely to continue doing well. As the evidence shows, through such investments, businesses in the region are likely to grow faster, and become more efficient and competitive on an international stage.

As a general observation, PE in MENA has proven to be a "sticky" form of investment, while investments in public equity proved feckless. PE investments in MENA are long term, and often enhance the companies that they finance. As the industry matures, the true impact of PE involvement in the region will become clearer, but the evidence from other regions suggests that it is likely to play a very positive role.

The white paper was supervised and co-edited by Prof. Josh Lerner, the Jacob H. Schiff Professor at HBS and Director of the Private Capital Research Institute.  

About Growthgate Capital 

Growthgate Capital focuses on growth equity capital investments in middle market companies operating principally in the GCC and in other select markets in the MENA region. Growthgate Capital was formed in late 2007 with $200m in permanent capital contributed by a handful of shareholders including State-owned banks, public pension funds, and single-family offices. As of December 31, 2013, Growthgate Capital has circa $1.7bn in Assets-under-Monitoring. The firm has conducted several investments in various sectors including: logistics and transport, building materials, steel fabrication, waste management, animation and themed entertainment, private jet management, biometrics, food processing and catering. The firm is managed by Growthgate Partners.

For more information, please visit http://www.growthgate.com

Media & Corporate Contact:
Sabina Lindstedt
+971-4-3302220
[email protected]

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Platform-as-a-Service (PaaS) is a technology designed to make DevOps easier and allow developers to focus on application development. The PaaS takes care of provisioning, scaling, HA, and other cloud management aspects. Apache Stratos is a PaaS codebase developed in Apache and designed to create a highly productive developer environment while also supporting powerful deployment options. Integration with the Docker platform, CoreOS Linux distribution, and Kubernetes container management system ...
There are many considerations when moving applications from on-premise to cloud. It is critical to understand the benefits and also challenges of this migration. A successful migration will result in lower Total Cost of Ownership, yet offer the same or higher level of robustness. In his session at 15th Cloud Expo, Michael Meiner, an Engineering Director at Oracle, Corporation, will analyze a range of cloud offerings (IaaS, PaaS, SaaS) and discuss the benefits/challenges of migrating to each of...
Cloud data governance was previously an avoided function when cloud deployments were relatively small. With the rapid adoption in public cloud – both rogue and sanctioned, it’s not uncommon to find regulated data dumped into public cloud and unprotected. This is why enterprises and cloud providers alike need to embrace a cloud data governance function and map policies, processes and technology controls accordingly. In her session at 15th Cloud Expo, Evelyn de Souza, Data Privacy and Compliance...
VictorOps is making on-call suck less with the only collaborative alert management platform on the market. With easy on-call scheduling management, a real-time incident timeline that gives you contextual relevance around your alerts and powerful reporting features that make post-mortems more effective, VictorOps helps your IT/DevOps team solve problems faster.
Containers and microservices have become topics of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 16th Cloud Expo at the Javits Center in New York June 9-11 will find fresh new content in a new track called PaaS | Containers & Microservices Containers are not being considered for the first time by the cloud community, but a current era of re-consideration has pushed them to the top of the cloud agenda. With the launch ...
Skeuomorphism usually means retaining existing design cues in something new that doesn’t actually need them. However, the concept of skeuomorphism can be thought of as relating more broadly to applying existing patterns to new technologies that, in fact, cry out for new approaches. In his session at DevOps Summit, Gordon Haff, Senior Cloud Strategy Marketing and Evangelism Manager at Red Hat, will discuss why containers should be paired with new architectural practices such as microservices ra...
Roberto Medrano, Executive Vice President at SOA Software, had reached 30,000 page views on his home page - http://RobertoMedrano.SYS-CON.com/ - on the SYS-CON family of online magazines, which includes Cloud Computing Journal, Internet of Things Journal, Big Data Journal, and SOA World Magazine. He is a recognized executive in the information technology fields of SOA, internet security, governance, and compliance. He has extensive experience with both start-ups and large companies, having been ...
HP and Aruba Networks on Monday announced a definitive agreement for HP to acquire Aruba, a provider of next-generation network access solutions for the mobile enterprise, for $24.67 per share in cash. The equity value of the transaction is approximately $3.0 billion, and net of cash and debt approximately $2.7 billion. Both companies' boards of directors have approved the deal. "Enterprises are facing a mobile-first world and are looking for solutions that help them transition legacy investme...
The industrial software market has treated data with the mentality of “collect everything now, worry about how to use it later.” We now find ourselves buried in data, with the pervasive connectivity of the (Industrial) Internet of Things only piling on more numbers. There’s too much data and not enough information. In his session at @ThingsExpo, Bob Gates, Global Marketing Director, GE’s Intelligent Platforms business, to discuss how realizing the power of IoT, software developers are now focu...
Operational Hadoop and the Lambda Architecture for Streaming Data Apache Hadoop is emerging as a distributed platform for handling large and fast incoming streams of data. Predictive maintenance, supply chain optimization, and Internet-of-Things analysis are examples where Hadoop provides the scalable storage, processing, and analytics platform to gain meaningful insights from granular data that is typically only valuable from a large-scale, aggregate view. One architecture useful for capturing...
SYS-CON Events announced today that Vitria Technology, Inc. will exhibit at SYS-CON’s @ThingsExpo, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Vitria will showcase the company’s new IoT Analytics Platform through live demonstrations at booth #330. Vitria’s IoT Analytics Platform, fully integrated and powered by an operational intelligence engine, enables customers to rapidly build and operationalize advanced analytics to deliver timely business outcomes ...
DevOps is about increasing efficiency, but nothing is more inefficient than building the same application twice. However, this is a routine occurrence with enterprise applications that need both a rich desktop web interface and strong mobile support. With recent technological advances from Isomorphic Software and others, it is now feasible to create a rich desktop and tuned mobile experience with a single codebase, without compromising performance or usability.
SYS-CON Events announced today Arista Networks will exhibit at SYS-CON's DevOps Summit 2015 New York, which will take place June 9-11, 2015, at the Javits Center in New York City, NY. Arista Networks was founded to deliver software-driven cloud networking solutions for large data center and computing environments. Arista’s award-winning 10/40/100GbE switches redefine scalability, robustness, and price-performance, with over 3,000 customers and more than three million cloud networking ports depl...
The speed of software changes in growing and large scale rapid-paced DevOps environments presents a challenge for continuous testing. Many organizations struggle to get this right. Practices that work for small scale continuous testing may not be sufficient as the requirements grow. In his session at DevOps Summit, Marc Hornbeek, Sr. Solutions Architect of DevOps continuous test solutions at Spirent Communications, will explain the best practices of continuous testing at high scale, which is r...
Application metrics, logs, and business KPIs are a goldmine. It’s easy to get started with the ELK stack (Elasticsearch, Logstash and Kibana) – you can see lots of people coming up with impressive dashboards, in less than a day, with no previous experience. Going from proof-of-concept to production tends to be a bit more difficult, unfortunately, and it tends to gobble up our attention, time, and money. In his session at DevOps Summit, Otis Gospodnetić, co-author of Lucene in Action and founder...