PE & VC Investments Increase in Middle East

Private equity (PE) and venture capital (VC) investments in the Middle East have increased so far in 2024, targeting businesses that are outside the oil and gas sector, according to S&P Global Market Intelligence Data.

The Middle East — a region comprising 12 countries including oil-rich Saudi Arabia, the UAE and Iran — attracted $2.28 billion for the third quarter to Sept. 27, the financial intelligence company. This is already slightly higher than the $2.16 billion deal value for the full second quarter and nearly double the $1.19 billion in the first quarter.

However, the annual total is on track to fall well short of the $11.60 billion of capital attracted in 2023, particularly given the backdrop of continuing military conflict involving Israel, Palestine, Lebanon and Iran, the global rating agency said.

For the year to September 27, Israel had the most deals in the region with 150 PE-backed transactions, followed by the UAE with 70 and Saudi Arabia with 47, the data showed.

The technology, media and telecommunications industry recorded the most activity with 124 deals totalling over $2.15 billion. Real estate had the second-largest deal value at $752 million, followed by the industrial sector with $741 million.

Energy and utilities ranked the lowest with only two undisclosed deals even with rising private equity investment in global fossil fuel and renewable energy companies this year.

Top Three Deals

Lunate and Olayan Financing Co. WLL acquired 49% stake in in ICD Brookfield Place from Investment Corp. of Dubai and ICD-Brookfield Management Ltd. for $735 million this year. After the deal closed, Lunate and Olayan each owned a 24.5% stake in the Dubai, UAE-based business centre.

The second-largest deal was Apollo Global Management Inc.’s planned $600 million purchase of a 50% stake in iron blending and distribution company Vale Oman Distribution Centre LLC. The Vale SA subsidiary operates a maritime terminal in Sohar in Oman, with an integrated iron ore blending and distribution centre that has a nominal capacity of 40 metric tons per year.

The third deal Third is Silver Rock Group’s $325 million investment in the UAE-headquartered generative AI company Pathfinder Global FZCO, S&P Global data revealed.

Green Energy Investment Bottlenecks

The ratings agency also said that renewable energy projects in the Middle East have taken a backseat this year as armed conflict remains the most pressing concern, according to Baker Institute’s Middle East Outlook report.

Additionally, certain renewable energy projects such as green hydrogen production, which Saudi Arabia is pursuing to ease dependence on oil, are unattractive for investors and developers, the report, quoting Ian Palmer, an oilfield engineer and partner at Higgs-Palmer Technologies LLC, the report said.

“The future of hydrogen is limited by time and cost because its main application is in hard-to-abate industries like aviation, shipping and manufacturing of steel and cement,” Palmer wrote in an email to S&P Global Market Intelligence.

Potential investments to capture and store carbon emissions from industrial processes such as steel and cement production, as well as from fossil fuel combustion in power generation, also have limitations in the oil-rich Middle East.

“Carbon capture and storage won’t save oil and gas because it would require an industry as big as the oil and gas sector,” Palmer said.