ADQ-backed Aliph Capital expects to close maiden deal before end of 2022

Exclusive: The company is in talks with more investors to reach a $250m target size of its debut fund after receiving $125m from ADQ

Aliph Capital's maiden fund is domiciled in the Abu Dhabi Global Market. Victor Besa / The National

Aliph Capital, a GCC-focused private equity fund manager that recently raised $125 million from Abu Dhabi holding company ADQ, expects to make its maiden investment deal before the end of this year.

The company, which has a strong pipeline of deals, “should be doing something very soon”, Huda Al Lawati, founder and chief executive of Aliph Capital, told The National on the sidelines of the Future Investment Initiative in Riyadh.

It plans to make two to three investments a year after “deep diligence”. Overall, Aliph Capital will make 10 to 12 deals over the course of its $250m debut fund's life, Aliph Fund I (LP), Ms Al Lawati said.

“We always have a pipeline of 10 to 12 deals of which we very closely look at four or five. However, we don't take more than two or three deep diligences at any given time,” she said.

“Private equity funds are tenure funds with an investment period of four-to-five years. So we're going to deploy $250m over the course of that.”

Private capital deals in the Middle East and North Africa have increased to 214 in the first half of this year 2022 from 76 in the second half of 2019 before the onset of the coronavirus pandemic, prompted by an increase in technology-enabled and digital platforms, according to the 2022 Mena Data Insight report from the Global Private Capital Association (GPCA).

Investment has surged to about $19.5 billion from $570m in the aforementioned period, with the largest private equity deal in the region being in the tech space as Blackstone Group acquired UAE-based technology and visa outsourcing services company VFS Global for $1.1bn in May 2022, according to the GPCA report.

Last year, PE activity was led by Silver Lake’s $800m investment into Abu Dhabi’s AI and cloud computing company Group 42.

Aliph is already evaluating a couple of deals targeting companies with good growth stories and an average Dh100m in annual turnover, Ms Al Lawati, a former Abraaj Capital executive, said

The average ticket size of Aliph Capital investment will be in the $15m-to-$40m range, mostly investing as growth partners in companies.

The typical profile of a target companies entail “a good product, a good brand name and market share … and they should have good management”, she said.

Aliph Capital received backing of ADQ as corner stone investor into its Abu Dhabi Global Market-domiciled fund earlier this week.

ADQ, which in March, consolidated its venture capital activities under DisruptAD, said building a strategic partnership with an Abu Dhabi-based private equity fund dedicated to serve SMEs “further supports our aim to accelerate sustainable economic development and growth within the UAE and [the] region”.

Aliph Capital plans to take sizeable, active positions in privately owned mid-market companies and then “our job is to help them get to the next stage [of their growth]”, she said.

We always have a pipeline of 10 to 12 deals of which we very closely look at four or five. However, we don't take more than two or three deep diligences at any given time

Aliph capital is sector agnostic and remains focused purely on the quality of a target company. However, there are investment themes within the GCC region, which the company like including consumer and specialised sectors and niche categories such as lifestyle and health and wellness.

The company is also bullish on transport and logistics sector as an investment theme, driven by supply chain issues and rapid growth in the e-commerce market in the region, Ms Al Lawati said.

Private equity companies, venture capitalists and state-backed investors including ADQ are boosting investments in start-ups and growth stage companies as they become an increasingly important part of the global economic development agenda.

Globally, the value created by start-ups stands at about $3 trillion, which is almost at par with the economic output of a G7 economy, according to advisory company Startup Genome.

Funding for these companies broke records in 2021 when it hit $621bn, according to CB Insights.

Start ups in the UAE raised $699m in the first half of 2022, ranking the Emirates as the leading country for venture capital financing in the Mena region, according to data platform Magnitt.

The UAE also led the region in terms of deals, which grew by 10 per cent in the six-month period from a year ago, with the biggest deal being a $181m convertible note mega-round for Abu Dhabi-based Pure Harvest in June.

The Arab world’s second-largest economy attracted more than $1.47bn in venture capital in 2021, according to Magnitt data.

Aliph Capital has already achieved the first closing of its maiden investment fund.

It is now in talks with sovereign, institutional, family and high net worth individual investors to raise more financing to reach the fund’s target size of the $250m.

“There’s no set target date in mind,” Ms Al Lawati said when asked when she expects to final closing of the fund.

The company also does not have immediate plans to launch another fund and will only consider it once it expands operations and grow in size, she added.