Challenges for Private Equity in the GCC (Re-post)

Entrepreneurs in the oil-rich Gulf have many challenges to overcome that begin with raising the required capital for their businesses. In this wealthy region, one may wonder why Gulf investors shy away from private equity, where all of the angel investors are.

It is, in fact, not possible to say that Gulf investors or even expatriates based in the region shy away from risky investments. Over the past few years, we have all seen real estate buyers purchase property that cannot be registered in their names from developers who have no established history delivering projects. We have also seen these same buyers borrow money from banks and place a down payment on a unit in order to flip it in the not-too-distant future. All of the elements show that investors have been ready to go into risky territory.

A similar pattern has been noticed in the stock market, where investors purchase stocks of companies that are overpriced without conducting any due diligence on the company’s background, including its management and the PE ratio of the stock itself. So why aren’t we witnessing the same pattern with the private equity industry in the region?