Private Equity Investment in the Middle East: Deal Structures and Issues

Mark W. Saltzburg, General Counsel, Abu Dhabi Investment House (ADIH), UAE

Private equity investments are structured differently in the Middle East than in other regions of the world. Traditionally, the Middle East has been a source of capital for a number of private equity firms outside the region, particularly prominent US based private equity firms that focus in part on “going private” leveraged buy-outs of publicly traded companies. In recent experience, a number of private equity investment managers have established investment advisory operations in the Middle East itself. Also, while the investment strategy of such managers can be international in scope, in many cases they have invested heavily in the region due to the high level of expected returns based on robust local economic growth. This article focuses on deal structure issues in connection with the formation of Middle Eastern based private equity funds and in connection with execution of their transactions. As a matter of definition, the term “private equity” is used in this article to refer to investments in investment fund companies that have shares that are not listed on an exchange and are not redeemable on demand and that tend to invest for the long-term in illiquid assets or securities. The features of Middle East market practices, corporate law, property law and securities law combine to make such private equity deals fundamentally different than in other jurisdictions. This article provides a guide to the practitioner in understanding critical issues regarding fund and deal structure where there is a close nexus to the Middle East, particularly in connection with Gulf Cooperation Council countries, deriving from one or more factors such as the location of the fund manager, the source of capital or the location of the target asset.