Faisal bin Juma Belhoul

'We have said nothing about 3i until now as we did not want their involvement to influence the success of the fund', explains founder and managing partner of Ithmar Capital, Faisal Bin Juma Belhoul. 'We originally approached 3i with the idea of Ithmar Capital investing in companies in their portfolio that wanted to expand in the GCC region.

'But after the 3i team spent considerable time with us visiting the different GCC countries where they met with opinion makers, regulators and family business owners, we were delighted when they were so keen on having a partnership with Ithmar Capital.'

Ithmar Fund I

Ithmar Capital's first $70 million private equity fund was created as a vehicle to roll over a portfolio of companies that belonged to the Belhoul Group, which holds seven companies in various sectors predominantly in the healthcare sector. This was seen as a proof of concept to fine-tune Ithmar Capital's expertise in adding value to portfolio companies in the private equity field.

'We will ideally do seven to nine deals over a three to four year period with business enterprise value of $15-20 million, up to $500 million', says Mr. Belhoul. 'That means two or three deals a year but we will be looking at an aggressive target of 100-200 opportunities each year.

'In some parts of the world private equity now has too much money pursuing too few opportunities. But here it is the other way around with too little smart private equity money available to cope with all the opportunities.

'People bring them to us but the best opportunities are those we create ourselves and go to people and suggest them. Then it is a matter of convincing the parties of the value added.'

Private equity adds value

But what value does selling your business to a private equity company bring? How does this assist the development of a business?

'First an institutional partner for better corporate governance and reorganization into an institutional form that will improve the business and its value. Secondly in assisting a company in geographical growth across the GCC; not just funding but in using our shareholders knowledge and base to allow them to enter new markets.

'And finally we can help with non-organic growth through acquisitions and mergers, particularly through working on corporate development while allowing the management to stay focused the existing business.'

Of course the other value of a private equity concern is its ability to help owners exit their business and realize more value; either through a trade sale or a public floatation. Ithmar Capital has successfully completed a partial exit from one business in its first fund with 45% internal rate of return and has two other deals in progress.

Investment commitment

'The way our fund works is that we draw down funds over an investment period with not more than 35% of the investor's committed capital to be invested in a single year, which plays an important role from a 'year of investment' diversification.

'We will be investing in non specific sectors in the second fund, including telecoms and oil and gas. We will tap on the 3i relationship to bring some of their portfolio companies to the region or even investing jointly with 3i in some of the most attractive global opportunities.'

Otherwise Ithmar Capital is looking for the traditional candidates for private equity investment: regional family companies, multinational asset sales and expatriate owned businesses. The aim is to deliver minimum IRR of 25% to investors, although Mr. Belhoul believes that with regional growth rates so strong, Ithmar can do better than that.