Lumina Private Company Index ("LPCI") Q2 2019
Lumina Private Company Price Index
Regional GCC trends: Continuing uptick in the LPCI in Q2 2019 from 6.4x to 6.5x, and narrowing spread versus GCC public company indices this quarter reflecting increasing levels of M&A activity.
With buyers now seeing value in Industrials and Agri/food sectors, we expect M&A to accelerate into the second half of 2019 to other sectors such as healthcare and consumer.
The construction and contracting sector continues to face significant challenges despite announced infrastructure spending across the region, and the impact of these initiatives are yet to translate into deal activity.
We expect subdued activity in Q3 as we head into the long hot middle east summer period, with a resurgence in Q4 of pipeline deal announcements prior to the calendar year end.
Saudi Arabia: We expect an increase in transaction volumes during the remainder of 2019, based on elevated levels of deal preparations we are seeing from clients. Key drivers of activity include government led mega infrastructure projects and privatization reforms, loosening of foreign ownership restrictions in key sectors and the recent inclusion of the Tadawul in the MSCI index. With relations between China and the Middle East at an all-time high, together with ‘belt-and-road’ initiatives gaining traction, cross border flows to and from the East continue to drive investment activity across the kingdom. Continuing focus on family groups portfolio consolidation, sale of non-core assets and monetization efforts in order to geographically diversify investments. We are seeing several family groups investing in UK and Europe in order to import skills, technologies and know-how into the Kingdom.
Cross-border activity: Lumina’s “State of M&A” survey indicates c.75% of target activity outside the GCC being directed towards the UK and Europe.
Private Equity’s woes in the region continue to exacerbate with little to no direct LP capital being raised in the post Abraaj era, and minimal regional PE investments.
However, secondaries transactions continue to pique international private equity interest, both at a fund and portfolio level, which we expect to drive most of the PE action in the region.
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