Alternative debt funds will be crucial to supporting funding gaps in Middle East markets, particularly for the small and medium-sized enterprises, which represent a significant part of the region’s non-oil economy, according to experts.
Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia (MEASA), said raising funds in the Gulf region remains challenging despite the “great start-up ideas and the myriad opportunities that the region has to offer investors”.
He added: “We are pleased to see the necessary reforms and the progress that regional governments have made in improving the financial business landscape. We also commend their efforts in providing extended and improved terms to support local businesses in growing, and not just surviving the coronavirus crisis. Such efforts will lead to greater economic sustainability and long-term benefits for the economy.”
His comments follow a webinar hosted by the Institute of Chartered Accountants in England and Wales (ICAEW) on fast tracking mergers and acquisitions (M&A) in the Middle East.
Discussions centred on how corporate finance is shaping capital raising, driving transactions and supporting business transformation to help economies adapt during and beyond the coronavirus pandemic.
Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia (MEASA)
Panellists included David Petrie, ICAEW head of Corporate Finance, Daniel Howlett, MENAT HSBC Bank Middle East Limited regional head of Commercial Banking, Hani Bishara, EY Middle East, MENA head of Debt Advisory and Restructuring, David Stark, Deloitte Middle East partner and head of Restructuring Services, Andrew Tarbuck, Al Tamimi & Company head of Capital Markets, and Elie Fakhoury, AlixPartners Middle East, director, Turnaround & Restructuring Services.
Although the level of deal flow in 2020 has been similar to pre-crisis levels, the types of transactions and the reason for them have differed, they said.
According to the panellists, many companies have followed a “safety in pairs” joint venture model, rather than a more strategic, proactive approach of trying to find synergies and cost saving measures.
The speakers indicated that the Covid-19 pandemic has impacted deals significantly, and the business environment and willingness of international investors to do business in the region has changed due to uncertainty in the market and recent high-profile scandals.
Despite this, international investors are still interested in venturing into Middle East markets, but are more selective of the types of assets in which they invest – focusing on strong and resilient businesses that are able to cope in the current climate.
While the speakers were “cautiously optimistic” for M&A deals in 2021, they advised businesses not to venture into new areas but to focus on their core sectors.
The speakers also highlighted sectors that offer lucrative opportunities for private equity investors, such as sustainability technologies, telemedicine, and EdTech.
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