Affirma Capital looks to double asset base to $7bn within five years

Former private equity arm of Standard Chartered is looking at 15 potential deals in Mena

The Dubai skyline. Affirma Capital is actively looking at transactions in the UAE, Egypt, Jordan and Saudi Arabia Getty

Affirma Capital, the former private equity business of Standard Chartered Bank, expects to double the size of its $3.5 billion of assets under management within the next five years as it looks to invest more in the Middle East, Africa and Asia.

The company, which has $400 million in cash to invest, is actively looking at 15 potential acquisitions within the Middle East and Africa region, Taimoor Labib, founding partner and head of its Middle East and North Africa business, told The National.

“We should double the AUMs within the next three-to-five years,” he said. “The $3.5bn [in] assets under management includes dry powder, so we have money to do new deals.”

Affirma Capital, which is owned and managed by former Standard Chartered executives, currently has 35 investments across China, India, the Middle East, South-East Asia, Sub-Saharan Africa and South Korea.

It holds stakes in companies such as Jordan’s Fine Hygienic Holding and Al-Jazeera Agriculture in the Middle East.

“In terms of the Middle East, we are very actively looking at transactions ... in the UAE, Egypt, Saudi Arabia and Jordan,” said Mr Labib.

“We have a pretty big emphasis on the UAE and Egypt,” he said.

Mr Labib said most of the 15 deals it is currently evaluating are in these two markets.

Affirma, which typically invests between $25m and $100m in a deal, expects to close at least one transaction involving a healthcare-related company, he said, without disclosing the target company.

Historically, the Middle East and Africa region has accounted for about a fifth of Affirma's assets under management and this is expected to remain consistent as the company grows its asset base globally, he said.

Despite 2020 being a year of low asset valuations, Affirma was unable to increase its assets as it was a “bit of the challenge to close deals and ... exit deals”, he said.

The biggest challenge in finalising deals this year will be to become “comfortable” with the 2020 numbers of target companies, particularly those in the second half of the year.

“If you do that, deals will close, not only for me but for others [private equity companies] as well,” he said

Affirma is looking to raise more funds to expand its portfolio and has “considerable pockets of co-investors” that could be used, depending on the size and the nature of a potential acquisition, said Mr Labib.

The Middle East is expected to experience strong momentum in fundraising this year and the next, he said.

“People recognise that these are going to be ‘good vintage’ [years for investing] and we are cautiously optimistic that there will be a good opportunity to invest funds in the coming 18 months.”

Speciality healthcare, pharmaceutical companies, quick-service restaurant chains, retail operators and e-commerce and digital payment platforms are the type of companies that Affirma expects to invest in.

It is already evaluating several healthcare and pharmaceutical deals and is particularly interested in restaurant chains that have survived a tough year amid the pandemic.

With much of the competition eliminated due to Covid-19 restrictions, the surviving outlets, “we think, will be the winners when in-house dining continues”, said Mr Labib.

Covid-19 has changed investors’ perspective about the type of companies they would like to buy, as technology and online capabilities, which were part of the investment thesis, have now become the basis of investment decisions, he said.

“The new companies we look at, if you don’t have that technology backbone and the online logistics, we won’t even look at you. It needs to be in their DNA,” he said.

Affirma, whose focus is private equity deals, is considering adding new products such as a debt fund and entering secondary market transactions by buying stakes from other private equity firms and investors.

“We think credit and mezzanine finance is a well-known and understood sector here,” he said.

Mr Labib, who previously managed assets worth $1.5bn as Middle East and Africa head of Standard Chartered Private Equity, is also bringing “like-minded” professionals together to set up the Mena Private Markets Association, an industry body that is intended to improve the private equity sector’s image after the failure of buyout companies such as Abraaj Capital in recent years.

The sector’s reputation took a hit when Abraaj collapsed in 2018 after investors raised concerns about the management of its $1bn healthcare fund.

After Abraaj’s collapse, “when we were talking to international LPs [limited partners], I got sick of having to defend the Middle East and to defend my like-minded alternative investment firms [where] 99 per cent of the people do the right thing”, Mr Labib said.

“Our business is opaque, if you want to make it opaque, but private markets are actually quite straightforward. So, one aspect of that [Mena Private Markets Association] was to try to fix the narrative.”

The Mena region has a population of about 400 million people and private equity firms have made a lot of money here, but foreign investors are not familiar with many of its success stories, he said.

The move to establish the association was a “combination of factors ... but the reception has been great and people are really very happy that we are taking the lead on this”.

The charter of the Mena Private Markets Association will be finalised within the next couple of months and membership is being considered on a “selective” basis but could easily reach a few hundred this year, he said.