Gibson Dunn & Crutcher, Dewey & LeBoeuf, Clifford Chance and Hourani & Associates have closed a rare PE transaction for The Carlyle Group amidst a tough PE market in the Middle East.
Gibson and Hourani & Associates worked together as international and Saudi counsel to advise Carlyle on its acquisition of a 30% stake in Saudi lighting company, General Lighting. Dewey advised General Lighting while the debt provider, Bank Audi SAL retained Clifford Chance’s Abu Dhabi partner Richard Ernest, who was assisted by associate Donna Marsh and Al-Jadaan & Partners' Mohamed Hamra-Krouha. Tahir Jawed and Manuela Belmontes from Maples and Calder's Dubai office advised Bank Audi on Cayman laws while Hatim S Zu'bi & Partners advised on Bahraini laws.
The transaction was the first Saudi acquisition for the Carlyle Group, which has remained active despite the slowdown in the global PE market. In Asia, the company has so far made 118 investments and has just closed a new US$2.55bn fund focused on acquisitions in the region, named Carlyle Asia Partners III.
It is also increasing its focus on the Middle East market, having raised US$500m raised last year for acquisitions in the region. According to media reports, Carlyle may not be the only one cashing in on the estimated US$10bn PE market this year in the Middle East, as executives at other PE firms expect deal activity to pick up.
Dubai-based partner Paul Harter, who led Gibson’s team on the transaction, is less confident of an immediate pick up in regional PE activity. “The trend line coming out of the worst of the financial crisis is good, but not steep. Six to 12 more difficult months would not surprise me,” he added.
The legal market has been plagued by lack of funding for deals. “Sourcing deals remains difficult; it’s been a very difficult market for financial sponsors in the Middle East,” said Harter. “Low investor confidence and tight credit markets means that only the best and strongest have been able to get deals off the ground.”
Harter says that more deals will unsurprisingly depend on the security of the debtor, and those like Carlyle (which his firm has represented on several deals in Europe and the US) may do well. “Carlyle and a small number of the more prestigious regional players are well positioned to do more deals sooner than others,” he said. “Lenders want to lend on the security of reputation, more than on the security of assets or cash flows. Carlyle is one of the only international players with a regional buyout fund and if they say they will do more deals this year, I believe them. Carlyle is a valuable client, and we hope to partner with them as often as it makes sense for them.”
PE Deal Volume by Region
Source: Ernst & Young
Updated to include counsel provided by Maples and Calder and Hatim S Zu'bi & Partners
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