This report investigates the investments made by USA investors into Middle Eastern companies throughout 2020. Only announced deals are analyzed. This report will outline the type, volume, and industries of these deals.
USA Capital Market Overview: Middle Eastern Companies
In 2020, 118 cross-border deals were announced between USA-based investors and Middle Eastern-based companies in which a total of $5.2 billion was deployed. This report lays out the volume, industries, and number of deals completed in this cross-border category.
FIGURE 1: Investments Over Time
- Deal count remained consistent in 2020 but capital rose substantially in Q1 and Q3 due to large strategic acquisitions.
- Venture capital firms conducted the largest volume of deals and account for 84% of the total count in 2020.
- Strategic acquisitions made up 8% of the deal count but contributed 98% of capital deployed.
- Two large acquisitions contributed towards the majority of capital raised. These were the acquisition of Careem by Uber in Q1 and the acquisition of Peak Entertainment Software by Zynga in Q3.
- A total of 10 strategic acquisitions were conducted with a median of $1.03 billion with large deals in oil and gas companies and mobile technology.
- Private equity groups were not particularly active in these cross-border deals, and conducted a total of five deals.
2020 Cross Border Investments by Industry: USA Investors and Middle Eastern Investments
USA-based venture capital and private equity groups invest in a wide range of Middle Eastern companies with a particular focus on cutting-edge technology and innovative companies. Strategic acquisitions are industry-specific and designed to grant large corporations in the USA access to Middle Eastern markets.
FIGURE 2: Capital Breakdown
- Several deals span industries, such as the acquisition of Careem by Uber for $3 billion, which is categorized as application software, automotive, and platform software.
- Application software was the most active industry for cross-border investments by USA investors in 2020 in both deal count and capital raised. A total of 25 deals were conducted and a total of $3.13 billion was raised in the sector.
- Business productivity software and financial software industries saw a high deal count, particularly with venture capital firms. A total of 20 deals were conducted in each sector with a median deal size of $1.45 million in financial software and $0.84 million in business productivity software.
Investor Spotlight: NGP Capital
NGP Capital, formally known as Nokia Growth Partners, is a subsidiary of Nokia. The firm specializes in providing growth capital to technology businesses and has made more than 90 investments since its inception in 2005. NGP Capital is active in the USA, Europe, and Asia and has conducted deals with companies such as Deliveroo, Xiaomi, Moovit, and UCWeb.
Figure 3: NGP Capital
Investment by Industry in 2012 – 2020 (announced deals)
- NGP Capital completed 20 deals in 2020 and increased assets under management to $1.2 billion.
- NGP Capital has an industry focus on digital health, intelligent enterprise, and smart mobility sectors.
- The firm’s median capital invested in 2020 was $25 million, a marginal increase from their five-year average of $24.6 million.
Deal Spotlight: Fetchr
Fetchr is a provider of automation and digitization solutions for shipping and logistics companies. The company is headquartered in Dubai and operates across the Middle East with offices in Abu Dhabi, Riyadh, and Cairo. Fetchr is expanding its global presence and has offices in London and Beijing.
The company utilizes GPS tracking to provide domestic and international courier locations via its positioning, predictive, and machine learning technologies. This facilitates faster and more efficient deliveries and allows clients simpler access to domestic and international shipping.
Most Recent Financing Status
- Fetchr raised $58.4 million based on a pre-money valuation at $340 million of Series C1 venture funding in a deal on September 5, 2020.
- The round was led by CMA CGM, CEVA Logistics, and NEA.
- NGP Capital, BECO Capital, Iliad Partners, Hussein Hachem, Tamer Group, and Majid Al Futtaim also participated in the round.
- The funds will be used to accelerate growth, as the company sets its sights on further global expansion.
- NEA is an early-stage venture capital firm based in Maryland, USA. The firm has $24 billion in assets under management and has made 70 investments in the last 12 months.
The 118 deals and $5.2 billion of capital deployed by USA investors in Middle Eastern companies showcase the importance of cross-border deals in the region. Venture capital groups are active in the lower to middle market segments and focus on technology-enabled businesses. Strategic acquisitions are used to grant large USA-based firms access to the region and typically occur with mature and developed Middle Eastern companies. As the Middle East grows in population and income levels, J&A anticipates activity from USA-based investors and strategic acquirers to increase.