Solving the funding gap: Lumina Cross Border M&A Survey Deep Dive 1

In Lumina’s recent M&A Cross Border Survey we identified the growing trend of utilising debt and mezzanine finance to facilitate transactions in the Middle East.

We sat down with Omar AlYawer of Ruya Partners, for the first in our deep dive series to explore reasons behind this trend and how the right funding solution can plug M&A funding gaps.

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Q: Omar, could you start by telling us a little about Ruya Partners?

Omar: Certainly, at Ruya Partners, we focus on structured credit investments to support mid-market private companies across the MENA region. Our deals are designed to support cash-flow-generating, growth-oriented businesses by providing flexible and alternative sources of capital when compared to traditional bank or equity funding options. We enter each deal with a mindset of partnership to support value creation and can tailor each deal with bespoke security packages and structured income requirements, which sets us apart from traditional financing.

Q: Respondents in Lumina’s Cross Border M&S survey reported an increase on both the use of debt and hybrid / mezzanine transaction funding compared to last year, what do you think is driving this?

Omar: The credit market for transactions has developed significantly over the last 5-10 years. Several regulatory changes with regards to free zones, fund rules, security enforcement, and insolvency proceedings has created an internationally competitive ecosystem of particular interest to a number of national and international credit providers.

This has coincided with the growth of the middle market, supported by Government driven initiatives to develop the private sector as part of broader economic diversification agendas. In particular, the emergence of regional champions and the maturing of a number of successful VC backed businesses into mature enterprises, has driven demand. These businesses often require more flexible and alternative financing solutions to fuel their growth ambitions compared to traditional bank funding.

Over the past few years, it is market awareness of the benefits of offerings such as ours and the ideal situation suited to a private credit deal that has driven increased deployment.

Q: You mentioned that private credit at Ruya differs from traditional debt and equity financing, can you expand on this?

Omar: Absolutely, unlike traditional bank loans, our unitranche and mezzanine finance allows for much more customization to meet the specific needs and characteristics of each deal. We can create bespoke security packages and contractual payment schedules. This allows us to look at transactions and profiles that might not typically be considered by other funders.

Compared to equity funding our financing has two clear benefits, firstly the shareholders avoid equity dilution, meaning they can access the growth capital they need while still maintaining ownership and control. Secondly, our deals provide predictable contractual cash flows and defined exit timetables, giving our clients a clear line of sight on cash flows and exit strategies—something that’s less certain in equity investments.

Q: What characteristics do you look for in an ideal investment?

Omar: We’re particularly drawn to companies that demonstrate strong cash flow generation. Ideally, these businesses have an EBITDA of over $5 million and can support regular debt service. Beyond cash flow, we look for growth-oriented and scalable operations with a growth story supported by macroeconomic trends. Lastly, we prioritize robust security packages, allowing us to secure our investments through assets like share pledges, guarantees, and other forms of collateral.

Q: Are there specific sectors Ruya focuses on?

Omar: While we’re sector-agnostic, some industries in the MENA region present particularly compelling opportunities due to ongoing economic diversification and demographic trends. For example, infrastructure and energy are areas aligned with national diversification strategies, such as new infrastructure projects and power generation. Technology and media are also interesting; for example, our partnership with Starzplay Arabia was close to profitability, but offered exciting upside potential in a fast-growing sector for the region. Finally, we see education, healthcare and healthcare associated sectors as essential for the long-term socio-economic development of the region, making them attractive from both an impact and investment perspective. For example, in late 2023 we were able to support our portfolio company GymNation, with its expansion into Saudi Arabia, supporting the Kingdom’s goals to improve the health and wellbeing of its population.

Q: Could you break down the typical structure of a Ruya deal?

Omar: Our deals generally fall under secured or subordinated loans, with a few key components. Debt instruments we provide include senior secured loans, mezzanine loans, and unitranche facilities. In some cases, we may also include equity upside instruments like warrants or profit participation rights, which enhance the potential return. And, of course, we structure each deal with comprehensive security packages—these might include share pledges, asset security, and corporate guarantees to protect our investment.

Q: What are some of the challenges you face, and how do you overcome them?

Omar: One of the challenges we frequently encounter is helping counterparties understand how our share pledges and other security measures work. Communicating the value and mechanics of these structures takes time, but once they see how it protects both parties and mirrors our partnership approach to investments, they become more comfortable with it.

Q: You have mentioned your partnership approach to your investments, can you expand a little more on this, how do you work with portfolio companies once you’ve made an investment?

Omar: We take a very active approach to portfolio management and our partnership mindset during due diligence, where we build an initial bond with the company’s leadership. Unlike traditional finance providers, our goal isn’t just to deploy capital but to ensure that our financing supports the company’s projected growth. Since we’re both owners and investors, our counterparts understand that we’re aligned with their long-term success rather than the typical annual bonus cycles you see with other fund structures. We also conduct ongoing monitoring of financial performance and value creation support by offering strategic guidance and operational assistance when needed. Additionally, compliance monitoring is critical—we proactively step in if risks are identified, ensuring that covenants are adhered to, ultimately for the benefit of all parties involved.

Disclaimer 

The contents of this article are intended for informational purposes only. The article should not be relied on as professional advice.

Neither Ruya Partners nor Lumina Capital Advisers accepts responsibility for any loss occasioned by actions taken or refrained from as a result of reading or otherwise consuming this article.