"The reason for this is the bright prospects for the private equity industry (PE) in Saudi Arabia. PE is needed by growing local companies to enable them to cross the 'debt valley'," said Ahmed M. Al-Sari, executive partner at Malaz Capital.
Many say that the Kingdom will be the next big private equity market in the Middle East and North Africa (MENA) region.
Addressing the summit on Sunday, Muhammad Al-Agil, Jarir Investments' CEO, said that PE investments are great catalysts for growth.
"The Saudi PE market is good because of its GDP growth. Its succession challenges is a catalyst and the changing socio-economics, demand for value-added and specialized products, and governance bodes well for industry," he said.
He added that the local PE market is looking for some fund history, sector specialists, investors willing to part with a substantial part of their net worth, experienced players in private equity and good managers, among others.
"The Saudi PE market has a great future. One good factor going for its PE market is its diversified economy. It has oil, manufacturing, service, health and insurance sectors. Only few of the companies in these sectors are listed and those that are not comprise the market for private equity," said Ali Mustafa Mansoori, deputy CEO of Riyadh-based Wasatah Capital.
"I think the biggest opportunity for the local PE industry lies in the individual entrepreneurs looking for investment that can provide them with what the traditional family group can provide," added CEO of Siraj Capital Ibrahim Mardam-Bey, who addressed the summit on Sunday.
Ali Munir, associate director at London-based Terra Firma, believes that family groups will be in a good position to be PE market players because they have the capital, banking relationship and are well-entrenched in the business.
One company intending to set up its offices in Riyadh is New York-based Revere Capital Advisors LLC.
"Saudi Arabia is ideal for venture capital market and private equity because of its demography, which is attractive for growth investment. Because of the youthful nature of the population, sectors such as retail, consumer products, hospitality, education and healthcare will be growing in the future," he said.
He added that there are challenges in terms of the regulatory environment, deal accessibility and contract enforcement, but these will be overcome as time goes by.
"The demand of a youthful population will lead to modifications in the regulatory environment and deal accessibility will improve as local industrial growth begin to embrace values beyond PE financing," he said, adding that his firm may open its business in the local market in six months time.
Another company planning to enter the local market is Jordan-based Ithmar Invest.
Senior Vice President Ahmad M. Judeth said that his company is intending to open its office in Riyadh in a year's time.
"We will take it one step at a time. We'll go slowly. There are things to consider. For instance, there are local regulations that we have to comply with. We'll also have to be registered with the Saudi Capital Market Authority (CMA) and this takes some time. Another thing to consider is the fact that the market is new and not yet mature," he said.
The firm will initially invest $2 million in its operations in Saudi Arabia.
Ithmar Invest has offices in the United Arab Emirates and Qatari capital Doha, where partners each own 20 percent of the company's capital.
Jawad K. Kamal, the company's assistant vice president, added that the growth of the PE industry will depend on how fast family groups can be encouraged to invest in the local market, adding that most local business ventures are in the hands of Saudi families.
"There are two ways to participate in the local PE market. One is the hard way and the other is the easy way," he said.
The hard way, he said, is adopting a hands-on approach.
"Doing it yourself, encountering things that you have not expected. So in the process, you learn," he said.
The easy way is to attend PE summits.
"You don't only share experiences with industry counterparts but also learn them, which you may apply as PE industry player," he said.
The Dubai-based Institute of International Research (IIRME) in partnership with the Saudi Arabian General Investment Authority (SAGIA) is holding the summit.
