Private Equity in Saudi Arabia | Salaries | Culture | Job

How should you approach it if you ever want to get a job in private equity in Saudi Arabia? What is the market for private equity in Saudi Arabia? Would you get better opportunities in private equity elsewhere if you lived in Saudi Arabia?

The privatization drive by Saudi Arabia has attracted many private equity firms, including KKR. KKR and other regional companies are looking for opportunities from Saudi Arabia’s government's plan to sell around $200 billion in assets. Additionally, investment banks like Citigroup have already obtained their investment banking licenses. Other top investment banks like Goldman Sachs, Credit Suisse, and JPMorgan are looking for a full banking license in Saudi Arabia.

We will discuss all of these and more in this article. But first, let us look at the sequence of the article.

In this article, we will talk about the following: -

Three things impede the growth of the private equity market in Saudi Arabia. These issues are inherent within the system and pretty tough to come out of. That is why the private equity market in Saudi Arabia is still in the early stage of development.

The first big issue in the private equity market in Saudi Arabia is the influence of family-owned businesses. Around 95% of the companies are family-based, which is not ready to give in their control to outside forces. As a result, it is becoming significantly tougher for private equity firms in Saudi Arabia to tap into this particular market.

The second major issue is the lack of a sound, codified legal system. The lack of a structured legal system has resulted in arbitrary judicial decisions that have put investors in ambiguity. They cannot judge how much risk is attached to a particular investment. Consequently, they are not ready to invest in transactions.

The third major pitfall is the lack of exit opportunities. When private equity firms are involved in a transaction, in most cases, they cannot find any exit if and when necessary. IPO exits, leveraged capitalizations, and secondary buyouts are rare in Saudi Arabia. As a result of which, the only alternative is trading sales. A trade sale is a way to sell the stakes to corporate entities to come out of an investment.

According to the 10th annual report of MENAPEA, in 2016, it would have taken only 32% of private equity activity in Saudi Arabia. It is second in volume for the entire MENA region, but there is a huge difference from the first, UAE (54%).

source: menapea.com

Why is it relevant?

Because in 2015, Saudi Arabia was on top by capturing 34% of the entire region, and UAE was in the third position with only 24%.

Just in a year, the equation has been changed.

If it did not solve the above issues, it would be tougher for Saudi Arabia to grow exponentially and be the best destination in MENA for the private equity market.

So, what sorts of services do private equity firms in Saudi Arabia look at? Better to say what kind of areas they concentrate on to make their marks. Here are the top four spots of private equity firms in Saudi Arabia look at: -

• Acquisition of significant stakes in family-owned businesses: This is the major market in Saudi Arabia. And the private equity firms are trying to tap into the opportunity. It is seen many families-owned businesses in Saudi Arabia have been facing issues with their management or succession planning. And as a result, they cannot operate with the same efficiency. Through the experience and expertise of these private equity firms, they are trying the route of exit or making things better by leaving the major stake to private equity investors or going for an Initial Public Offering (IPO). It is a win-win for both of them. On the one hand, it will run the family business well; on the other hand, it is a great deal for private equity firms.
• Acquiring partnerships with international businesses: For businesses interested in coming into Saudi Arabia, private equity firms help them build a business in the Saudi Arabian market. The private equity firms help these international brands look for target businesses in Saudi Arabia and then see how much partnership they can acquire (often up to 100%) on their behalf. It is an area of expertise for private equity firms since the Saudi Arabian market is still emerging, and there are huge opportunities for international businesses.
• Acquiring minority stakes in blue-chip companies with IPO prospects: Private equity firms in Saudi Arabia want to make their mark and go for every opportunity they have in front of their eyes. Thus, they look for blue-chip companies about to exit through IPOs. These private equity firms look for minority stakes in blue-chip companies. They can work with the management team of investee companies and ensure a successful exit through IPO within a stipulated period.
• Investment in SMEs: Like investing in family businesses, SMEs in Saudi Arabia are a great market that private equity firms are now aiming at. Small and medium-sized companies that want to grow within the local periphery get complete support from these private equity firms. To get the help of private equity firms, small and medium businesses should have at least three years of continuous existence in the market, and the companies should be scalable. Private equity firms in Saudi Arabia work with the management of these SMEs and add value to improve their management capabilities and enhance the strategic output at an accelerated rate.

We should know about three private equity firms in Saudi Arabia. Have a look at them: -

• Alkhabeer Capital: This is one of the top private equity firms in Saudi Arabia that offers many services like IPOs, SME finance, merger and acquisitions service, etc. The firm was founded in the year 2008 in Jeddah. Website
• Ithraa Capital LLC: This is one of the top-notch investment banks in Saudi Arabia and has a private equity (research) division. The firm was established in Riyadh, offering various services like mergers, acquisitions, IPOs, financial and corporate restructuring, and private placement of shares. Website
• Maceen Capital: Maceen Capital is one of the most popular private equity firms. It was founded in 2008 in Riyadh. It offers modeling and valuation services, financial reviews, restructuring, and mergers and acquisitions. Website
• Jadwa Investments: Jadwa Investments and its investors have invested over SAR 5.4 billion in 10 private equity transactions. Website

The recruitment process in Saudi Arabia is different from the sourcing process in the UK and the USA. As the Saudi Arabian private equity market is still emerging, getting into private equity is still easier. So, what would you do if you wanted to get into the private equity market in Saudi Arabia?

Here is a step-by-step process to get you started: -

• Sourcing from the universities & institutes: Since the private equity market is pretty small compared to the other parts of the world, universities and institutes' major recruitment source is done. However, there are different ways candidates get into private equity firms.
• By applying online directly: If you are not fortunate enough to be picked from your university, you may need to take a direct path. All you need to do is to go to the website of the particular private equity firm and find out the “career” page and apply online through the instructions given. In most cases, if you can send a great resume (written with private equity languages) and a cover letter, you may/may not get through. You know how many resumes HRs go through daily! And out of all, only 5%-10% of the resumes get shortlisted for the preliminary round (“fitment” interview).
• The power of networking: This is the most important thing if you want to get ahead of the curve. Network as much as you can. Get a list of people who have studied in your college, find out how many work in private equity, get their contact details, and directly contact them. Many would not respond to you, but few will. And though a few people, you will get a couple of interviews or a few internship opportunities. Never let these opportunities go. Go for some internships (summer internships are popular in Saudi Arabia). And whatever interviews you go for, make sure that you are thoroughly prepared for all of these interviews.
• Style of interviews: In Saudi Arabia, a recruitment agency is hired to hire good private equity candidates for private equity firms. These recruitment agencies go through the campuses and pick great talents. And also, they look for candidates outside. No matter what, the first round is always a “fitment interview.” The recruitment agencies conduct this first round to see whether the candidate is a good fit for the particular team. Then, there is a second round with the partner and a solicitor. If you can clear this round, there will be another round, usually the last. In the final round, you will be interviewed by the Managing Director and HR of the firm, and they will find the best candidate.

As the entire environment is different in Saudi Arabia, the work culture is also pretty different.

There are two things to talk about regarding work culture.

• Firstly, people in private equity firms are not so pressed for funds like the UK or the USA. They take a slow approach to handling clients, and the clients are also okay with it. Thus, rarely do people work 100+ hours in private equity firms. They work normal hours and maintain a healthy work-life balance, which helps them set aside a large chunk of time for family. Normally, you would get 52 days of holidays a year, and during the festive season, you can work half a day because most of your clients would be out of the office. 95% of businesses in Saudi Arabia are family businesses. So, people value relationships over technical skills, even in the business scenario.
• Secondly, in private equity firms in Saudi Arabia, you will get a lot of diversity these days. Again, this is because people belong to different countries, working together to ensure optimum success.

This section will examine the salary details for private equity professionals in 2014. These data will help us understand what could be the future salaries for private equity professionals in Saudi Arabia.

In 2014, Arab World Careers did research that resulted in various professionals' series of data. Therefore, we will highlight the portion of the compensation of private equity and investment banking professionals at all levels.

source: optimalhrgroup.com

The above salary guide does not include a performance bonus. From the above list, it is clear that the basic compensation is not as high as in the UK or the USA. But, if we consider that the whole income is tax-free (no income tax, no sales tax, no VAT), then the compensation is quite good.

The bonus compensation is dependent on performance. So, if you can perform well, you will be able to bring in a hefty paycheck, and you do not need to pay taxes. But if you are in the USA, your salary would not be completely tax-free.

In real scenarios, not many Saudi Arabian people work in private equity. But people who do are pretty happy with their job, work hours, and compensation. As a result, rarely do people think of exit opportunities.

But when people do, there are usually three options.

1. Private equity professionals go for venture capital firms. Many venture capital firms in Saudi Arabia and private equity professionals would like to explore different opportunities.
2. They go for hedge funds/investment banking. Investment banking is doing pretty well in Saudi Arabia, and many foreign banks are also coming to Saudi Arabia to source opportunities.
3. The last option is shifting from Saudi Arabia to other countries like the UK or the USA to hone their technical skills and earn better career prospects.

You would be better off in private equity if you went to the UK, USA, and Dubai. Saudi Arabia is still an infant in terms of private equity, and there is a massive opportunity for the private equity sector to grow. And we can expect that it will come up with some wonderful private equity deals in the next decade.

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