Lumina Private Company Index (“LPCI”) Q1 2021
Lumina provides an update on GCC private Company M&A for Q1 2021
Regional Trends
In Q1 2021 we saw the EV/EBITDA multiple further increase from 5.9x to 6.1x. This upward trend reflects Tadawul, ADX and DFM public market movements, where multiples increased from 16.0x to 16.8x.
Regional funds and family offices are seen to be much more actively looking at new acquisitions as they seek to re-position their portfolios for an expected growth period.
The recent closing of the first flour mills privatization in KSA shows that deal making is firmly back in the region’s largest market. Demand for acquisitions reflects regional and international recognition of market opportunities.
Lumina’s recent hires in KSA and the UK markets reflects our increasing cross-border deal confidence.
Healthcare deals at attractive multiples
Amanat Holdings PJSC, a Dubai-based education and healthcare investment firm, acquired Cambridge Medical & Rehabilitation Center, a rehabilitation provider, for an enterprise value of USD 232mn. At an implied EV/EBITDA, of 10.5x the transaction provides a 4.6x (source: AnalyzeMarkets) return on capital to TVM Capital Healthcare and should provide further confidence on regional PE exits.
We expect more healthcare deals to close in the short term as Jadwa Investment is considering options for its stake in UEMedical, whereas NMC has started a process to explore options for its UAE and Oman operations. Other specialty healthcare services firms are also actively being pursued by regional strategics as they seek to expand their services offerings across the value chain.
Popularity of private debt continues
In our previous quarter LPCI we identified the increasing popularity of yielding convertible debt financing instruments, driven by uncertainties in equity valuations of private companies. NBK Capital Partners’ recent closing of a USD 300m Credit fund reflects the confidence in the flexible capital solutions market. With valuations rising, corporates are increasingly seen to be looking at mezzanine / hybrid deal structures as they bridge their growth capital requirements.
We believe that private debt / convertible structures will remain popular as long as the valuation gap between buyers and sellers remains, which we currently see happening as a result of disagreement on the Underlying EBITDA to base the valuation on as a result of pro-forma Covid-19 adjustments.
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