Kenya records highest private equity penetration in Middle East, Africa

Kenya had the highest percentage of private equity- and venture capital-backed private companies in the Middle East and Africa as of December, according to S&P Global Market Intelligence data.

The private equity (PE) penetration rate measures the proportion of private companies in a market that have private equity or venture capital investment.

Kenya's penetration rate was 13.27% as of Dec. 12. Of the 4,877 private companies in Kenya, 647 are private equity-backed, including 169 in the technology, media and telecommunications (TMT) sector.

Israel ranked second with a penetration rate of 11.98%, while Tunisia ranked third at 11.46%.

The 32 select Middle Eastern and African markets in the analysis had an aggregate penetration rate of 4.63%. By comparison, the region had a 4.83% rate in November 2023.

Asia-Pacific recorded a penetration rate of 2.86% in November, while the European Union's rate was 0.54%. Latin America and the Caribbean had a 2.28% rate as of December.

Measuring by the number of private equity-invested companies, Israel had the highest number in the Middle East and Africa at 3,959. South Africa followed with 1,893, while the United Arab Emirates recorded 1,253.

Relaxed regulations drive PE investments

Countries in Africa have implemented legislative reforms to attract investors to the region, said Steven Worthington, a UAE-based partner at White & Case LLP.

"We've seen more liberalized foreign ownership restrictions, reforms in bankruptcy rules and regulations and more sophisticated licensing and regulatory regimes that make doing business much more palatable and easier for some of these established private equity players," Worthington said.

Kenya has liberalized investments in the country, allowing foreign investors full ownership in sectors other than those related to national security, according to the intergovernmental organization East African Community. Foreign investors can also sign joint ventures with Kenyan firms.

– Download a spreadsheet with data in this story. – Read about global private equity entries in November – Explore more private equity coverage

The Middle East, particularly Saudi Arabia, has attracted private equity investments due to relaxed rules on foreign investments as well as attractive exit scenarios through IPOs, said Walid Salib, a Saudi Arabia-based partner at Hogan Lovells.

"In a private M&A deal sell-down, typically, you'd achieve maybe 11 to 12 multiples. But on [a Saudi] IPO, you'd achieve 18 to 20 multiples. PE investors are looking at it as a great way to achieve value over the next three to four years," Salib said.

Market Intelligence data shows private equity and venture capital deal value in the Middle East reached $12.72 billion for the year to Nov. 30, exceeding the full-year 2024 total by more than 46%.

The UAE and Saudi Arabia are encouraging investment into diverse sectors in order to build economies not reliant on oil and gas, Worthington said.

Largest PE-backed sectors in Middle East, Africa

The TMT sector has the highest number of private equity-backed companies across the Middle East and Africa at 4,635, according to Market Intelligence data. Israel has the highest number of private equity-backed TMT companies in the region, with 2,065, followed by the UAE with 467.

The consumer sector ranked second with 1,866, followed by the industrial sector with 1,387.