The Middle East represents a rare ‘bright spot’ for M&A with strong risk-adjusted returns: Lumina Private Company Index (“LPCI”)

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  • Lumina notes resilience in dealmaking in traditional sectors, despite global headwinds 
  • A weak pound and the need for capital in Europe are driving a two-way street of capital flows between Europe and the Middle East 
  • In an inflationary and high interest rate environment, sentiment in 2023 will prioritize investment yield and structured returns over capital stocks 
  • The fallout in the tech sector is taking root in the Middle East, with a marked slowdown in funding for technology companies

Dubai, UAE: Lumina, the leading corporate finance advisory firm connecting capital and transactions across the Middle East and the UK, has published its latest quarterly report, ‘The Lumina Private Company Index (“LPCI”) Q3 2022’, and reveals the prevalent themes for 2023. The first private company M&A index covering the GCC, the Index tracks private company M&A transaction multiples across a broad range of sectors in the GCC, together with publicly available information in the market. 

The report states an overall increase in the LPCI from 6.2x to 6.6x, reflecting a resilient M&A dealmaking environment as traditional sectors such as manufacturing, oil and gas services and industrials show strong levels of activity. With significant infrastructure spending announced regionally, consolidation in the construction and contracting sectors are gathering pace with the aim of building regional champions with specialist skills to service increasingly large scale, complex projects. 

In terms of dealmaking, the region represents a rare ‘bright spot’ supported by government initiatives, strong GDP growth forecast and attractive risk-adjusted returns. In parallel, the weak pound in the UK and the need for capital in the UK and Europe means that Lumina is increasingly seeing a two-way street of capital flows between the Middle East and Europe. Another key trend is the noticeable increase in capital being deployed into the region as multinationals and funds seek ‘boots on the ground’ and identify direct regional investments. 

The global slowdown in the tech sector has led to a marked reduction in funding rounds for technology companies, as the fallout takes root in the Middle East. However, capital is still available for deep tech, AI, digital transformation, cybersecurity and other technology creators. 

George Traub, Managing Partner at Lumina comments, “Key investment themes for 2023 will prioritize preference for investment yield and structured returns over capital stocks in an increasingly higher interest rate and inflationary environment.  We also expect Private Equity fundraising to pick up significantly in the special situations, rescue funds and secondary strategies with the IPO boom providing exits for family conglomerates and private equity.” 

About Lumina Capital Advisers 

Lumina Capital Advisers Limited (“Lumina”) focuses on matching capital and transactions between the Middle East and the UK. With offices in London, Dubai and Riyadh, Lumina’s team of experienced dealmakers brings senior level international expertise to family conglomerates and private equity clients from the region, the UK or around the world. With over 100 years of collective experience, the team at Lumina has advised on more than 100 M&A, financing and restructuring transactions across the globe. They have consistently delivered unconflicted, dynamic and international standards of deal execution with longstanding counterparty relationships. Lumina is regulated by DFSA.