MENA Private Equity Fund

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Arab Private Equity Industry
Prepared for the AVCA 5th Conference in Kenya 6
9 November 2005
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Agenda
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I.
Who we are?
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EFG-Hermes Egypts Premier investment banking
firm
Structure
Securities Brokerage
Investment Banking
Asset Management
Private Equity

• EFG-Hermes has 400 employees, up from 30 in 1994
  
• Offices in Cairo, Dubai (2002) and Riyadh (2005)
• Listed on the London and Cairo Stock Exchanges
  with a Market Cap of 1,053Mn (30.Oct.05)
• Brokerage executed 40 of all transactions on CSE
  and UAE arm 211Mn in April alone
• Investment Banking raised 4.1Bn in equity
  transactions and advised 11Bn MA transactions
• Asset Management manages 5 local and 3 off-shore
  funds with a total NAV of 750Mn

Who we Are
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EFG-Hermes Private Equity 5 funds under
management plus 2 closing in 2005
EFG-Hermes
EFG-Hermes
EFG-Hermes
Commercial International Investment Company 1994
Horus Private Equity Fund 1997
Middle East Technology Fund 2000
US 54 Million
US 25 Million
US 189 Million
Closing
Closing
EFG-Hermes
EFG-Hermes
EFG-Hermes
EFG-Hermes
Jordan IT Fund 2000
Horus Private Equity Fund II 2005
Horus Food Agribusiness Fund 2005
Technology Development Fund 2004
US 9 Million
US 4.5 Million
US 50 Million
US 155 Million
Aggregate funds under managements US 543Mn
(incl. US 61Mn proprietary investments)
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MENA Economic Market Profile
GDP 619Bn
Market Cap (28.Oct.05)
Market Cap 1,183Bn (192 of GDP)
Roughly that of Spain
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MENA Stock Market Trends Significant growth in
Regional Indices
Non-GCC Countries Market Trends
GCC Countries Market Trends

• Drivers oil prices market deregulation

Drivers economic reform and corporate profits
Abbreviations ADI (Abu Dhabi), QSI (Qatar), MSI
(Oman), SSI (Saudi Arabia), BAX (Bahrain), KUSI
(Kuwait), MASI (Morocco), AMMAN (Jordan), HRMS
(Egypt) and BLSI (Lebanon)
Source Zawya, 29 October 2005
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MENA Private Equity Regional PE 2005
Source Private Equity Monitor, EHPE
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MENA Private Equity Players Sample of funds
raised or being raised in 2005
Note Does not include Citadel, an Egyptian
buyouts boutique
Source EHPE, Zawya, October 2005
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MENA Private Equity PE Industry Size 3.4Bn (lt
1 of GDP)

• Industry grew at 41 CAGR over past 5 years and
  projected to grow at 25 in next 3 years
• 2.2Bn raised up to 2004 with gt 3.4Bn raised
  or being raised in 2005

Source Private Equity Monitor, EHPE
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Profiles of MENA PE Funds 60 Funds (1/3rd
Buyouts by value and volume)
Funds by investment focus
Source EHPE, Zawya, October 2005
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Trends in MENA PE Funds More focused on Buyouts
Fund focus (All funds before 2005)
Fund focus 2005
Mn
Mn
Source EHPE, Zawya, October 2005
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Geographic Focus of Fund 2005 and 2006 PE Funds

• Shift in the geographic focus of funds. Prior to
  2005, many funds were chasing opportunities in
  Levant and Egypt.
• Today, the GCC and MENA, with its buyouts
  economies, is the focus of close to half of the
  funds being raised.

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MENA Private Equity Trends Wave of Funds being
raised is different

• Median fund sizes increased from US 55Mn to US
  150Mn
• Evolution of Mega funds NTEC US 330Mn, GCC
  Energy Fund US 300Mn
• Investment range increased to attract bigger deal
  sizes
• More focus on funds with buyout profiles
• More focus on growth and late stage rather than
  seed, start ups, and SMEs
• Targeting Pre-IPO and trade sale
• Adopting intl industry reporting valuation
  standards
• Technology funds are quickly losing attraction,
  while energy is gaining momentum
• Shift in the geographic focus of funds

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III.
Private Equity in Egypt
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Egypt Completed 1st Cycle going thru
2nd Private Equity riding the Cycle
Private Equity fund raising trends
State of the Economy
Recession
Recovery
Boom
Slowdown
Recession
Recovery
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Egypt PE Exits EHPE Realizations (aggregate all
funds)
Realizations routes
Summary
Aggregate realizations 68 Aggregate proceeds US
504Mn (2000-2004)
No. of realizations by sector
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Private Equity Players in Egypt 2005 PE Funds
with buyout focus
Note Does not include Citadel, an Egyptian
buyouts boutique
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Private Equity in Egypt US 1.2 billion in funds
under management (lt1 of GDP)
US Mn

• Egypt had 9 PE funds managing 650Mn up to
  year-end 2004
• In 2005, 5 new funds were established targeting
  505Mn ( 405Mn or 80 raised to date)

Source EHPE
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Egypt Private Equity Trends SMEs PE Financing

• 10 of 2005 PE investments in Egypt are available
  for financing SMEs
• Majority of the Egyptian business are SMEs
• SMEs financing available totals 59Mn
• Sector Specific IT ( 9Mn) and Food and Agri (
  50Mn)

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Egypt Private Equity Trends Larger funds with
buyout perspective

• Median fund sizes increased from 50Mn to
  100Mn
• Investment range increased (Horus I ceiling
  10Mn verses 30Mn Horus II)
• Majority control less emphasis on controlled
  minority
• Focus on recapitalization, turnarounds and
  privatizations
• Growth and late stages with less on start ups and
  SMEs
• Size important for potential IPO
• Building management teams to implement
  value-added strategy

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IV.
Challenges
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Challenges facing PE Industry EHPE Experience in
the Region

• Lack of PE financing for SMEs and Startups
• Intl institutions not interested local
  institutions will participate only if they do
• Difficult to exit
• Regulatory Environment
• Setting up local funds
• Enforcing shareholder agreements
• Codification of law
• Foreign Ownership
• Due-diligence
• Law firms and Auditors are catching up to develop
• Human Capital
• PE requires a special reservoir of high caliber
  human capital
• Investment Support
• Lack of strong management to implement investment
  strategy
• Exit Mechanisms
• Volatile Capital Market in the region

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Arab Private Equity Association APEA Core Mission

• Encourage cooperation between members in terms of
  providing resources, tools, and ensuring the fair
  pricing and high quality of materials in such a
  transaction
• Enhance deal flow between member companies
• Encourage the exchange of information and
  experience between members
• Increase opportunities for Cross-Country
  Investment
• Bringing PE concerns to the attention of
  governments and private investors
• Support for research, business information,
  economic feasibility studies, and statistics
• Providing the means for contacting Arab and
  foreign research groups
• Afford training, and knowledge for industry
  professionals on the technical, financial, legal
  aspects of Direct Investments as well as Venture
  Capital
• Organizing conferences, workshops and networking
  opportunities

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EFG-Hermes Private Equity 9 Mohamed Fahmy Street,
14th Floor Garden City Cairo, Egypt. Tel (202)
7923875/6/7 Fax (202) Email ciic.com.eg