Private equity groups see Saudi Arabia as a deep and diverse market. Lots of them ̶ regional and international ̶ will want to be more involved
to four years. Before, there was interest in just about any sector across the board, now it’s become more selective and refined.
“We see value in areas like health care, education and food. It’s a lot to do with the demographic of the region, as with the other emerging markets. These sectors are less affected by cyclical factors than areas such as construction, real estate and building materials,” Kutaifan said.
And there is a big plus: Asset valuations have got much more realistic. “The numbers just are not the same as they were three or four years ago,” he added.
The one exception is technology, he said, where valuations have continued to rise, and where the Middle East has seen some pretty big deals for apparently scarce assets, especially in the e-commerce space.
Earlier this year, US e-commerce giant Amazon paid $580 million for the region’s Souq.com, after an auction drove the price up. Then, Mohamed Alabbar’s online retail platform Noon bought a controlling stake in rival Namshi in a deal that valued it at around $300 million.
“Technology is a sector that has a dynamic all of its own, relating to forward-looking figures. This is a worldwide phenomenon, but also very noticeable in the region,” Kutaifan said.
Despite some experts’ fears that there is a “bubble” inflating in technology assets, Kutaifan thinks there is still potential appetite for the sector, especially in Saudi Arabia. “The big funds are still going after them. We hear the Public Investment Fund of Saudi Arabia has earmarked billions to invest in Saudifocused tech sectors. A lot of these are still in the startup, high-growth phase. There has been lots of talk about fintech (financial technology), but so far we have not seen something of real size in the region. Most of the big action has been in the e-commerce sectors,” he said.
But that will not deter his clients from looking seriously at all aspects of the Saudi privatization program.
“They are all very interested in what’s happening in Saudi Arabia. For example, the Al-Futtaim Group — a long-standing client — has already done deals there in automotive and construction markets a few years back, and they are still looking at the Saudi market. Private equity groups too see Saudi Arabia as a deep and diverse market. Lots of them — regional and international — will want to be more involved in Saudi Arabia.
“Health care and education are parts of the privatization plan and they will attract international interest. We’ve already seen banks from Kuwait and the UAE doing transactions in these sectors in Saudi Arabia and I’m sure that will accelerate,” he said.