Private Equity Discovers Deals in the Middle East

KKR, Blackstone Group, and other large private equity firms have long parachuted into the Middle East to hunt for cash from the region’s sovereign weatlth funds and family investment offices, only to carry it back to make investments in Western companies. Now they’re putting money to work in the region. Private equity acquisitions in the Middle East and Africa have jumped to $6.6 billion this year from $141 million in the same period in 2013, according to data compiled by Bloomberg. In one deal, at least three buyout firms including CVC Capital Partners and KKR are bidding for Kuwait Food, operator of 1,500 KFC and Pizza Hut restaurants in the Middle East and North Africa, say people with knowledge of the matter who asked not to be identified because the negotiations are private.

The flurry of investments follows a revival of the Middle East economy because of strong oil prices and increased government spending. It also represents a thank-you of sorts from buyout firms. Blackstone has tapped Middle Eastern investors for about $23 billion, or 8 percent of its total assets under management, according to a person familiar with the matter who asked not to be identified because the information is private. KKR filings show that at the end of last year 5 percent of its $61.2 billion in assets came from the Middle East. KKR did not respond to requests for comment. Blackstone declined to comment. “You can’t just take money from the region and go and invest it in the West,” says Mohammed Al-Shroogi, president for Gulf business at Investcorp Bank, based in Bahrain. “It is time to reinvest back into the region.”