Investors struggling to find cheap healthcare deals in Gulf.

Private equity firms looking to bag a bargain in the Gulf healthcare sector are out of luck, according to Abraaj Capital’s senior vice president for health.

Achmed Al-Shahrabani, who focuses on buy-outs and growth capital investments, says healthcare assets have kept their price despite the financial crisis. Unlike the property market, healthcare is a defensive sector, like education, which tends to be resilient when something like the global downturn comes along.

“This is mainly because there is significant pent up demand given the undersupply and growing need for the services,” says Al-Shahrabani.

“Valuations are a key element in deals; good assets come at a price. Because healthcare is more resilient to economic downturns than other sectors, valuations in general haven’t come down as much as in other sectors.

“In general, valuations in healthcare companies have generally remained stable, however in some instances we have seen some reductions.”

As countries struggle to cope with ageing populations and the rising incidence of obesity-related diseases such as diabetes and cardiovascular illnesses, various estimates peg the value of the healthcare sector across the Middle East and Africa at between $15bn and $18bn a year, and growth at a rate of 9 per cent a year.

Abraaj, which currently has $6.6bn funds under management, has three strategic investments in healthcare projects in Egypt, Turkey and Saudi, all markets driven by large populations with substantial health needs.

“Our criteria for investment are that it’s a well-performing company in an attractive industry with substantial future growth and good management in which we can take a controlling stake.”

Al-Shahrabani adds: “The tipping point for Abraaj on healthcare came in 2007 when we made our first major investment in the healthcare sector by acquiring a substantial stake Turkey’s Acibadem Healthcare Group.”

Read the full interview and healthcare report in this month’s Commerce, out May 1.

Founder of venture capitalist says investors are hungry to strike health sector deals.

While the private equity industry is hungry for growth in the UAE health sector, the number of available assets is limited.

“There are lots of private equity firms that want to get into the private health sector but the problem is there aren’t many assets for sale. The way we do it is we build our own assets. We currently have four health projects in the pipeline,” says Salam Saadeh, founder and CEO of Active-M Group.

“We build the health projects ourselves. And, as far as I am aware, there is no one else in this space. No one is focusing on the venture capital health market, the risks are high, but return on investment is also high.”

At the beginning of this year, Dubai Healthcare Authority, Active-M Group and Philips announced a joint venture to develop a strategic framework for delivering and marketing a Continuous Medical Education academy of excellence. The academy, based in Dubai, will offer both international and local accredited courses for all medical practitioners in the UAE and the GCC.

“Active-M and its shareholders put up the funds for Continuous Medical Education in Dubai; DHA has come on board as a guidance facility; and Philips is a preferred equipment partner,” said Saadeh.

“We’ve just signed the MoU for the Continuous Medical Education, so we’re still drawing up the strategy and finances. The project may be worth around US1.5 million. The VC projects often involve smaller capital than the private equity firms.”

The CEO added that the recession means the returns in stock exchange and real estate investment have diminished so clients people are turning to venture capital for high returns.

Active-M Group is building up its projects on a ‘deal-by-deal’ basis, before looking at launching a healthcare fund.

UAE business leaders must shout from the rooftops to make investors aware of the capital’s assets, expert says.

A senior Oxford Business Group (OBG) research manager told .Commerce magazine that Abu Dhabi must focus on making global investors aware of its strengths.

“One issue with the capital is that not enough people know how economically solid and politically stable the emirate actually is. Thanks to its bountiful natural resources and diversification strategy Abu Dhabi’s economy has a very positive outlook for the next 20 years, as outlined in its Economic Vision 2030,” said Trevor McFarlane, author of The Report, Abu Dhabi 2009.

“The emirate has strong fundamentals, which should attract investors, particularly institutional investors seeking high growth in emerging markets.”

He added that Abu Dhabi managed to avoid the worst of the global financial crisis by laying out its long-term economic plans and investing wisely.

“Abu Dhabi buttressed its credentials as an astute international investor in 2009 with solid global purchases. So it was not a bad year when you take into account that it was the worst financial crisis the world has ever seen.”

See Commerce March for the full Q&A interview with Trevor McFarlane, Abu Dhabi editorial manager at Oxford Business Group

FORMER ISTITHMAR CEO, DAVID JACKSON

Istithmar has a job convincing investors that its asset-selling strategy is by no means a fire-sale.

Dubai World’s investment arm Istithmar World has put its port and shipping agent Inchcape Shipping Services (ISS) up for sale for between $600m and $700m and has attracted interest from private equity groups.

At this point it’s worth remembering that Istithmar has nothing to do with the huge restructuring taking place at Dubai World, despite being owned by the emirate’s flagship conglomerate.

Something Dubai World made clear in a recent statement to its investors: “The process will not include Infinity World Holding, Istithmar World and Ports & Free Zone World.”

The problem is that any news at the moment of selling of assets or major personnel shifts at Istithmar is likely to get lumped into this larger restructuring process. Or worse, investors may see it as a reckless short cut to shore up confidence and offload assets for quick cash.

Either way, there will have been some nervous faces in boardrooms at Istithmar’s Emirates Towers headquarters over the last month.

David Jackson, the chief executive of Istithmar, resigned a few weeks into the New Year, leaving a legacy of borrowed capital as a major strategy for a variety of high-profile investments, including the New York boutique investment bank Perella Weinberg Partners and Cirque du Soleil, the Montreal-based entertainment company.

During his time at Istithmar, Jackson also acquired a number of high-end properties, including upscale retailer Barneys New York, Manhattan’s chic Mandarin Oriental Hotel and the landmark Fontainebleau Hotel in Miami, site of the James Bond “Goldfinger” film.

But, in December, Istithmar lost the W Hotel Union Square in Manhattan in a foreclosure auction. It bought the property for about $282m in 2006. It sold for $2m.

Now comes news that ISS is up for sale.

It’s, therefore, clear that regardless whether a restructuring falls under the Dubai World umbrella or not, Istithmar needs to reassure investors and banks that its not acting recklessly in a bid to grab instant cash, but instead prides itself on being a long-term value creator.