MENA PE activity cools down in 1H 2025 — but it’s mostly good news amid signs of a maturing market -Magnitt

Private equity dealmaking in the region took a dip in 1H 2025 as investors recalibrated to focus on bigger transactions with strong fundamentals. Some 29 private equity transactions worth USD 2.9 bn were recorded in the first half of the year, marking a 38% y-o-y decline by count and an 11% drop in value, according to Magnitt’s 1H MENA PE report. This is the third consecutive half-year of cooling PE activity in the region.

General partners are adopting a more risk-averse stance, pivoting toward fewer, higher-conviction transactions on scale-ready platforms with strong fundamentals, according to the report. This explains why the y-o-y drop in PE transaction value is less significant than the decline in volume.

PE transactions in the region skewed larger, with the two biggest size brackets hitting five-year highs in 1H. Transactions in the USD 500 mn to 1 bn range accounted for 29% of total volume, and 42% of total value, while those over USD 1 bn comprised 14% of the count and 36% of the overall value. Smaller buyouts (under USD 50 mn) fell to a record low of 14%, while the USD 100-500 mn bracket nearly doubled y-o-y to 29% of total PE activity by count, and 18% by value. The report does not provide comparative figures for 1H 2024, only the whole of 2024.

A sign the market is maturing: The slowdown reflects a strategic recalibration in the region’s PE market rather than a retreat. “The MENA region’s PE recalibration is being led by scale-ready SMEs and high-conviction strategies, not withdrawal. The growing dominance of USD 100 mn+ transactions signals a maturing landscape ready to absorb larger pools of capital,” El Nahlawi said in a press release (pdf).

Growth capital and buyout transactions were nearly evenly split in 1H, with growth transactions slipping to 52% of total activity as buyouts gained ground despite tighter credit markets, El Nahlawi told us. The trend points to investors favoring plays where they can take a more hands-on role in operations and actively drive value creation, aiming for exits via trade sales or strategic mergers, she added.

SOUND SMART- Growth transactions involve minority investments in established but expanding companies, providing capital to fuel new markets, products, or acquisitions without taking control. Investors rely primarily on the company’s organic growth for returns, with exits typically via IPOs or secondary sales. Buyouts, by contrast, involve acquiring a majority or full stake, often using leverage to gain operational control, drive restructuring or efficiency improvements, and create value through active ownership. While growth transactions are about accelerating expansion, buyouts are about taking charge to unlock value and position the business for strategic sales or mergers.

The period also saw a rise in syndicated transactions, with four of the top five PE plays involving co-investments between local and international investors. These co-investments are enabling deeper due diligence, better risk-sharing, and stronger operational oversight, El Nahlawi said. She explained that partnerships between global funds and local players are leading to tighter valuation discipline and more sophisticated transaction terms, including performance-linked earnouts and tiered exit provisions, as foreign investors balance protection with access to local market expertise.

KSA bucks the PE downturn: Combined, Saudi Arabia and the UAE captured 86% of all private equity activity in the region. KSA was home to 13 transactions in the first half of the year, up 8% y-o-y, accounting for the lion’s share (45%) of total activity in the region, supported by local investor appetite. The UAE recorded 12 transactions (41%) over the same period, down 25% y-o-y, with more capital flowing in from international buyers. Egypt (down 89%) and Jordan (down 50%) each saw one transaction in 1H.

Sustainability and fintech emerged as standout sectors in 1H, with sustainability-related transactions accounting for 57% of disclosed funding, fueled by large transactions tied to energy transition initiatives, El Nahlawi told us. These sectors combine scale potential with strong alignment to regional policy priorities, making them prime targets under today’s selective capital deployment, she said. SMEs outside this scale-ready bracket face a widening funding gap, as smaller ventures without clear exit routes or policy backing may struggle to draw investor interest unless supported by accelerators, development funds, or niche positioning, she added.

The overall outlook: El Nahlawi noted that despite global macro uncertainty, the GCC — particularly Saudi Arabia and the UAE — continues to show structural strength and investor confidence. She added that with sovereign backing, a pipeline of maturing SMEs, and supportive regulation, the region is well-positioned to capture future private equity growth.

MARKETS THIS MORNING-

It’s a sea of red across Asian markets this morning, led by a decline in South Korean stocks — which fell over 2% — as investors mulled the impact of the US’ tariffs on the region. Over on Wall Street, futures are also slipping after the big tariff announcement last night, and as investors await a key jobs report later today.

THE CLOSING BELL-

The ADX rose 0.2% yesterday on turnover of AED 1.5 bn. The index is up 9.9% YTD.

In the green: Umm Al Qaiwain General Investment Co. (+14.2%), United Arab Bank (+7.3%) and Commercial Bank International (+6.7%).

In the red: National Bank of Umm Al Qaiwain (-6.5%), Abu Dhabi National Co. for Building Materials (-4.4%) and Agility Global (-2.5%).

Over on the DFM, fell 0.8% on turnover of AED 731.9 mn. Meanwhile, Nasdaq Dubai was up 0.2%.