TBY talks to Mustafa Abdel-Wadood, CEO of Abraaj Capital Limited, on the company’s latest acquisitions, investments, and expansion plans.
TBY Abraaj Capital is the only private equity group in the global top 50 with operations based outside of Europe or the US. What has been the driving force behind the success of your operations?
MUSTAFA ABDEL-WADOOD We owe our success largely to our focus and persistence throughout our 10-year history. We have a strong commitment to the region, and beyond that, to high growth markets in general. Very early on, we recognized the entire region as a source of opportunity. When the firm was established, we identified the Middle East as a region with an interesting demographic and growth profile and saw that the corresponding opportunity for investment would be tremendous. By focusing on that vision and building teams ahead of time, we have been able to grow the business steadily.
What did the acquisition of London-based Aureos capital bring to the group?
This merger accelerated a plan that was already in place, which was to leverage the regional growth that we experienced by being based in MENASA. Five or six years ago, we expanded to Turkey and have experienced huge success there. A year ago, we targeted Southeast Asia and set up an office in Singapore. Leveraging the experience within the teams that we have in place as well as our understanding of helping businesses grow has been a core focus for us, and we have gradually been expanding the target investment geography. Our focus is on growth markets, and we are on a deliberate path to increasingly look at Asia and Africa, as well as other growth markets. The Aureos Capital acquisition provided the acceleration of that footprint in a very rapid manner, as it had been investing for 10 years in SMEs across Africa, Asia, and Latin America.
The healthcare sector has played a strategic role in Abraaj Capital’s investments. What makes this sector so attractive?
Health care is a sector with massive growth potential, and one we find to be extremely interesting. We have exposure to multiple aspects of the sector, from pharmaceutical retail to hospitals, medical labs, and everything in between. If you look at the demographics of growth markets, they are very underserved and underinvested in terms of health care across the board, especially in the MENA region. They are underserved right through from hospital beds, diagnostic labs, and infrastructure. Locally, health care has become one of the key priorities of the government. There is significant investment potential, especially for public-private partnerships (PPPs). It’s a space that provides opportunities at different levels and is largely counter-cyclical.
Why was it the right time to divest your interest in Turkish hospital group Acıbadem?
We invested in Acıbadem in 2008 at the peak of the boom, and during the four-five years that we held it, which were probably some of the most challenging in recent history, the business more than tripled in size in terms of profitability along a number of other metrics, including creating more than 5,000 jobs. The number of hospitals within the group also increased from six to 13, which proves that even in times of financial uncertainty and challenging environments, the sector continues to grow. There is a natural holding period for us, however. We go into an investment with a clear view on delivering support and value to the existing shareholder, entrepreneurs, and principals, in order to take the business to the next level. We ultimately aim to deliver returns to our investors, and so at some point we have to exit and seek opportunities elsewhere. However, we believe that the opportunities for the group remain strong, and that is why we continue to invest and have remained a shareholder in the holding company, IHH Healthcare Berhad.
What opportunities has the shifting political landscape in the Middle East created for investors with capital to deploy?
There has been a significant short-term impact in terms of uncertainty. However, if you look at how events unfold, what it ultimately results in is increased awareness of key issues that need to be addressed. In the long term, this thinking will take on a positive acceleration, and the countries involved will begin to build a much stronger economic base. Some of these countries had been growing economically at a phenomenal pace; however, in some cases they lacked sufficient focus on a more inclusive and sustainable growth model. In the short term, we will see slightly slower growth rates, but on more solid and strong foundations. For investors who are looking long term, they will find good fundamental local businesses looking for partners to drive future growth.
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