$250m Aliph Fund expects closure on GCC deals

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• Fund led by CEO Huda al Lawati
• Owns UAE company The Pet Shop
• Seeking $250m to invest

Aliph, a private equity fund that attracted $125 million from an Abu Dhabi sovereign wealth fund last year, is aiming to close up to three investments in GCC states UAE and Saudi Arabia by the end of 2023.

The Aliph Fund, set up by Aliph Capital and one of the few female-led private equity companies in the region, wants to raise $250 million to put into about 12 small to medium-sized enterprises.

Last month, it attracted an undisclosed commitment from the Jada Fund of Funds Company, part of the Saudi sovereign wealth fund PIF as well as other smaller family groups, with more expected to come on board soon.

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Huda al Lawati, founder and CEO of Aliph Capital, told AGBI she is looking to invest in companies operating in the beauty, veterinary services and distribution sectors this year.

Injections of between $15 million and $40 million are being considered, she added.

The fund debuted last year with a 100 percent buyout of the UAE’s largest pet business, The Pet Shop, comprising The PetShop, DubaiPetfood.com and Petsville.

“We’re very busy,” al Lawati said. “Our pipeline going into next year is also very active. We’re looking at logistics and healthcare and finding a lot of opportunities.”

Al Lawati, who has led more than $3 billion of equity and debt deals, said The Pet Shop investment is going “exceedingly well” after rebuilding the team, improving technology and opening new locations.

Within three months, The Pet Shop had been able to reduce its inventory by 40 percent while still growing sales, she said.

Aliph Capital is focused on the GCC with most investments to be based in the UAE and Saudi Arabia, the region’s biggest economies.

It aims to fill a gap in the market for funding for mid-sized businesses – typically with a top line of about $25 million and operating in high-growth sectors. 

Larger companies in the region are generally well served by a range of options, including sovereign wealth funds, banks and capital markets.

“The fact that sovereigns like ADQ are focusing on this asset class through us is exceedingly important,” Al Lawati said.

“This asset class is still nascent and continues to be challenging in that there is not enough funding. The only way it is going to get catalysed is by sovereigns willing to back managers like us.”

Private equity is in a period of slowdown worldwide as investors face lower growth and higher interest rates, which has raised the cost of borrowing. This in turn makes leveraged buyouts – which involve funding a proportion of the deal with debt – more challenging. 

However, private equity companies such as Aliph are less affected as they follow a growth strategy to invest capital to fund a specific expansion.

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In the Middle East, Al Lawati said other challenges persist related to the private equity sector still being relatively young and “some bad stories”.

Dubai’s Abraaj is one such tale. It was the largest buyout fund in the Middle East and North Africa (Mena) until it collapsed in 2018 after investors raised concerns about the management of its $1 billion healthcare fund.

While Al Lawati admitted the Abraaj saga has harmed the growth of the sector, she hoped a new generation will be able to “demonstrate good returns and exits” and build a better track record.

“For sure it used to create difficulties for companies looking to raise funds but the impact is decreasing,” she said.

Private equity and venture capital deal value in the Mena region edged higher in the second quarter of 2023 to over $5 billion but fell to less than $8 billion from $9 billion over the first half of the year, according to S&P Global Market Intelligence data.

A July report by investment data company Preqin and the Dubai International Financial Centre found that Middle East interest in private equity is increasing, with 65 percent of investors saying that they will maintain or increase exposure to PE this year.

Al Lawati said funding for female-led startups in the region remains limited. According to data from Wamda, it slumped by 88 percent over the first half of this year to less than $6 million, while male-founded startups raised way over $1 billion during the same period.

“It’s still a challenge, but I’ve got some significant funding from a sovereign wealth fund in the region and I think that is a big testament,” she said.