In this article

• Private Equity activity in the Middle East

• Investments by sector

• Start-up investments

• Country level analysis

• Cautious optimism

• Conclusion

• Sources & References

Private equity (PE) and venture capital (VC) activity in the Middle East has demonstrated notable shifts in 2024, reflecting both challenges and opportunities within the region’s evolving investment landscape. While overall deal value remains below the peaks recorded in previous years, there is a clear trend toward diversification, with investors increasingly targeting high-growth sectors such as technology, healthcare, and industrials. This shift aligns with broader economic strategies, particularly in key markets like Saudi Arabia and the UAE, which are actively pursuing non-oil investment initiatives.

Despite geopolitical uncertainties and macroeconomic headwinds, the region continues to attract significant PE/VC interest, underscoring its long-term potential. This report provides an in-depth analysis of investment trends, sectoral preferences, and country-level deal activity, offering insights into how private equity is shaping the Middle East’s financial landscape in 2024.

Private Equity activity in the Middle East

Private equity and venture capital activity in the Middle East has shown a promising uptick in 2024, with investments increasingly targeting non-oil and gas sectors. This diversification reflects the region's strategic pivot towards innovation, technology, and other high-growth industries. By the third quarter of 2024, the region had attracted $2.28 billion in deal value, already surpassing the $2.16 billion recorded in the second quarter and nearly doubling the $1.19 billion from the first quarter. While these figures signal momentum, they remain significantly lower than the $11.60 billion in investments recorded in 2023, constrained by geopolitical uncertainties stemming from ongoing conflicts in the region.

The Middle East, home to oil powerhouses like Saudi Arabia and the UAE, has become an increasingly attractive destination for PE/VC investors seeking opportunities beyond traditional energy sectors. As investors navigate economic diversification efforts and geopolitical challenges, the region's evolving investment landscape underscores both its potential and the complexities involved in deploying capital effectively.

Key takeaways from chart

• Investment Volumes:

  • The highest aggregate transaction value in the chart was $5.8 billion in Q1 2021, supported by 175 deals, showcasing a robust start to post-pandemic recovery.

  • By Q1 2024, investments dropped to $1.19 billion, reflecting the lowest point in deal value, paired with 100 deals, indicating reduced market activity.

• Deal Activity Trends:

  • The number of deals peaked in Q3 2021 with 243 deals, but steadily declined over time, with Q2 2024 registering 121 deals—a significant drop compared to earlier years.

  • Fluctuations in deal count suggest shifts in investor sentiment and deal pipelines, likely influenced by macroeconomic and geopolitical developments.

• Regional Resilience:

  • Despite the sharp decline from peak levels, Q2 2023 demonstrated resilience with $5.54 billion in deal value from 124 deals, a standout quarter amid the overall downtrend.

  • Q2 2024 saw a recovery in deal count to 121 and an increase in transaction value to $2.16 billion, signaling potential stabilization after a weaker Q1 2024.

• Annual Decline:

  • The projected annual total for 2024 is set to fall short of the $11.60 billion in 2023, underscoring the region's sensitivity to political and economic disruptions.

• Sectoral Shift:

  • Increasing focus on non-oil and gas sectors highlights efforts to diversify and align with global investment trends favoring technology, renewable energy, and innovation-driven industries.

Investments by sector

The Middle East's private equity and venture capital landscape is experiencing significant activity across various sectors, with investments showing a clear preference for technology, media, and telecommunications (TMT) businesses. The chart highlights the distribution of deal values and volumes across major industries, underscoring the region’s strategic pivot toward innovation-driven sectors. TMT stands out as the dominant sector, attracting an overwhelming majority of investment capital and deal activity, while traditional sectors like materials and real estate exhibit comparatively lower levels of engagement. This diversification reflects a broader effort to balance economic priorities amid the region’s ongoing transformation.

The data reveals the nuanced dynamics of PE/VC-backed investments, showcasing a blend of high-growth industries like healthcare and industrials alongside legacy sectors such as real estate. As the region continues to attract global investor interest, understanding sectoral allocations provides insights into the priorities shaping the Middle Eastern private equity ecosystem.

Chart Analysis

• TMT Leads the Pack:

  • The TMT sector dominates with $2.15 billion in aggregate transaction value and 124 deals, reflecting investor confidence in digital transformation and technological innovation.

  • This sector accounts for the highest number of deals, signifying widespread interest across multiple verticals within technology and media.

• Healthcare and Industrials Show Strength:

  • Healthcare attracted $726.24 million across 34 deals, underscoring the region’s focus on improving healthcare infrastructure and services.

  • The industrials sector saw $740.92 million in investments across 17 deals, highlighting interest in manufacturing and logistics as part of broader economic diversification.

• Emerging Focus on Financials and Consumer Sectors:

  • Financials recorded $343.82 million over 14 deals, demonstrating moderate activity in fintech and financial services.

  • The consumer sector, with $123.4 million across 21 deals, shows potential for growth, albeit with a smaller share of total investment.

• Underrepresented Sectors:

  • Materials and real estate remain underrepresented, with $134.55 million (2 deals) and $752.24 million (3 deals), respectively, reflecting reduced investor appetite in traditional asset classes.

  • The unclassified category recorded $653.66 million across 88 deals, likely reflecting exploratory investments or new industries.

• Sectoral Diversification:

  • The data indicates a growing emphasis on high-value sectors like TMT and healthcare while de-emphasizing traditional sectors such as materials and real estate.

Start-up investments

The Middle East's startup ecosystem has experienced significant fluctuations in funding activity over recent years, as shown by the dramatic rise in 1H22 and the subsequent slowdown in 1H23. Funding reached a remarkable $1.52 billion in 1H22, a record-breaking figure fueled by increased investor interest in high-growth sectors, government support for innovation, and favorable economic conditions. 

However, this momentum slowed considerably in 1H23, with funding dropping to $770 million, reflecting a 49% year-over-year decline. This shift underscores the impact of tightening global financial conditions, rising interest rates, and geopolitical uncertainties on the region's startup funding landscape.

Despite the decline, the startup ecosystem in the Middle East remains resilient, with growing opportunities in sectors such as technology, fintech, and sustainability. The chart highlights both the region’s potential for attracting venture capital and the challenges posed by macroeconomic headwinds. Below is an analysis of the key factors influencing these trends.

Key takeaways from chart

The Boom in 1H22:

• Funding deals surged to $1.52 billion, driven by significant investments in technology, fintech, and logistics startups.

• Government-led initiatives, such as Saudi Arabia’s Vision 2030 and the UAE’s robust startup incubators, bolstered investor confidence.

• A global wave of venture capital activity in 2021 and early 2022 spilled over into the Middle East, leading to record-breaking funding levels.

The Slowdown in 1H23:

• Funding dropped to $770 million, reflecting a cooling period in the global venture capital market amid rising interest rates and economic uncertainty.

• Investor caution, particularly from international backers, contributed to fewer large-ticket deals in 1H23.

• Geopolitical tensions in the region also weighed on funding activity, affecting investor sentiment.

Steady Growth Before 2021:

• Funding rose steadily from $208 million in 1H18 to $1.06 billion in 1H21, indicating growing investor interest in the region’s startup potential.

• The COVID-19 pandemic accelerated digital transformation, spurring investments in e-commerce, healthcare tech, and fintech.

Key Trends:

• A shift toward sustainable and tech-enabled businesses continues to drive interest, albeit at a slower pace in 2023.

• Local startups are increasingly focusing on scaling regionally, positioning themselves as attractive investments in a competitive market.

Outlook:

• While 1H23 funding levels are lower, the region’s ongoing digital transformation and government initiatives signal long-term growth potential.

• As global financial conditions stabilize, Middle Eastern startups are well-positioned to regain investor attention.

Country level analysis

The Middle East private equity (PE) landscape is undergoing notable shifts, with deal volumes reflecting evolving opportunities and challenges at the country level. The UAE, historically a hub for PE activity, continues to demonstrate consistent deal-making, albeit with a slight tapering in volume from 104 in the first half of 2022 (1H22) to 95 in the first half of 2024 (1H24). Meanwhile, Egypt has emerged as a bright spot, surpassing the UAE in 1H22 with 108 deals but exhibiting a more pronounced decline in subsequent years, down to 46 in 1H24. Saudi Arabia, often seen as a rising star in the region’s investment ecosystem, has maintained steady activity at 48 deals in both 1H23 and 1H24, reflecting sustained investor interest.

This divergence in deal volume highlights the nuanced dynamics of Middle Eastern PE markets. Countries like the UAE and Egypt remain attractive but face varied macroeconomic pressures and competition. Saudi Arabia’s Vision 2030 initiative and diversification efforts continue to position it as a promising PE destination, while smaller markets, grouped as "Others," have seen activity taper more significantly. For PE executives, these patterns underscore the importance of tailoring investment strategies to country-specific trends, aligning with both macroeconomic conditions and sectoral strengths.

Key takeaways from chart

UAE

• Deal Volume Trends: Declined from 104 in 1H22 to 95 in 1H24, reflecting a moderate slowdown but sustained high activity.

• Key Drivers: Strong infrastructure, regulatory support for investment, and robust financial services and technology sectors.

• Challenges: Growing competition from regional peers and the need for diversification beyond traditional industries.

Saudi Arabia

• Stability in Deal Volume: Steady at 48 deals in both 1H23 and 1H24, following a dip from 59 in 1H22.

• Growth Drivers: Vision 2030 initiatives, fostering investment in non-oil sectors like renewable energy, healthcare, and technology.

• Potential Risks: Economic diversification efforts are still in transition, with reliance on government spending posing risks to private investments.

Egypt

• Declining Activity: Fell sharply from 108 deals in 1H22 to 46 in 1H24, indicating reduced momentum.

• Attractions: A young population and growing sectors like fintech, healthcare, and consumer goods offer long-term potential.

• Challenges: Political and economic instability, including currency devaluation and inflation, have tempered investor enthusiasm.

Others

• Declining Volumes: Dropped from 42 in 1H22 to just 25 in 1H24, reflecting reduced interest in smaller markets.

• Key Factors: Limited scalability of opportunities and geopolitical challenges likely contributing to reduced deal flow.

• Potential Areas: Select niche opportunities exist in underpenetrated sectors like agritech and logistics.

Cautious optimism

The Middle East private equity (PE) deal landscape by value reveals a nuanced picture of investment activity, reflecting shifting priorities and market dynamics. Deals valued at less than $100M dominate the market, though their frequency has declined significantly from 162 in 1H22 to 101 in 1H24. In contrast, mid-sized deals valued between $101M and $500M have seen a steady decrease from 18 in 1H22 to just 7 in 1H24, signaling a more cautious approach to mid-tier investments. Large deals above $501M remain rare, with minimal activity over the three years analyzed. Meanwhile, the number of deals with undisclosed values has stabilized at 104 in both 1H23 and 1H24, highlighting a growing trend of opacity in deal reporting.

These trends reflect the cautious optimism characterizing the region’s PE space, as firms prioritize smaller, lower-risk investments while exploring growth in undisclosed or niche sectors. The data suggests a strategic pivot, with investors increasingly focusing on smaller deals that offer agility and faster returns. Simultaneously, the stabilization in undisclosed deal activity reflects a shift toward confidentiality in deal structuring, underscoring the need for robust data-driven insights to navigate this evolving landscape.

Key takeaways from chart

Deals Under $100M

• Dominant Category: Accounted for the majority of deals but declined from 162 in 1H22 to 101 in 1H24.

• Key Insight: Reflects a focus on smaller, less capital-intensive investments amid cautious market conditions.

• Strategic Implications: Smaller deals allow for greater agility, faster execution, and lower risk exposure, making them attractive in uncertain environments.

Deals Between $101M and $500M

• Steady Decline: Dropped from 18 in 1H22 to 7 in 1H24, signaling reduced appetite for mid-sized deals.

• Key Insight: Reflects increased scrutiny in capital deployment and a focus on high-growth, smaller-scale opportunities.

• Strategic Implications: Investors may be shifting away from this segment due to higher valuation concerns or limited availability of strong mid-tier opportunities.

Deals Over $501M

• Rare Activity: Only a handful of deals, with just 3 in 1H23 and 2 in 1H24.

• Key Insight: Highlights a cautious approach to large-scale investments, likely influenced by macroeconomic uncertainty.

• Strategic Implications: High-value deals remain selective and concentrated, requiring substantial due diligence and risk assessment.

Undisclosed Deal Values

• Consistent Numbers: Stabilized at 104 deals in both 1H23 and 1H24, down from 128 in 1H22.

• Key Insight: Reflects a growing trend of confidentiality in deal-making, possibly to avoid competitive or regulatory scrutiny.

• Strategic Implications: Firms may need enhanced intelligence tools to evaluate undisclosed deals and uncover hidden opportunities.

Conclusion

The private equity landscape in the Middle East is undergoing a period of transformation, driven by sectoral diversification, geopolitical shifts, and evolving investor sentiment. While overall deal activity has softened compared to previous years, the resilience of key markets, such as Saudi Arabia and the UAE, highlights the region’s ability to adapt to changing economic conditions. The growing focus on technology, healthcare, and industrials signals a broader move toward sustainable, innovation-driven investments, aligning with long-term regional development goals.

Looking ahead, cautious optimism defines the investment outlook. While uncertainties persist, particularly in geopolitical and macroeconomic arenas, the Middle East’s commitment to economic diversification and regulatory reforms continues to attract both regional and global investors. As the investment landscape stabilizes, private equity players will need to navigate these complexities strategically, leveraging emerging opportunities while mitigating associated risks.

Sources & References

S&P Global (2024). PE.VC in the Middle East. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/private-equity-deal-value-in-middle-east-on-the-rise-83566056

Statista (2024). Value of funding deals for startups in the ME. https://www.statista.com/statistics/882872/mena-value-of-startup-funding-deals/

PWC (2024). Middle East mid-year update. https://www.pwc.com/m1/en/publications/2024-transact-middle-east-mid-year-update.html