Private Equity firms must embrace the MENA digital revolution, says PwC

31 January 2018

As the digital revolution in the Middle East marches on, private equity firms will need to move with the times to remain relevant, says a survey report from PwC. 

In a market survey with a number of leading private equity (PE) houses in the Middle East, the Big Four accounting and advisory firm PwC has found that 80% of respondents believe that digitisation is ‘critical’ for the future readiness of their companies. To put this in context, just 62% of their European private equity counterparts previously surveyed believed that digitisation would deliver ‘sustainable value’ – although it was cited as the most important local trend influencing decisions.

And while ‘going digital’ features prominently in terms of investment decision-making and value creation planning for all of the Middle Eastern firms surveyed – some 90% of which are already in the process of digitising at least one of their portfolio companies – the firms remain cautious when it comes to initial investments and are unlikely to be early adopters of emerging technologies.

In this regard, the PwC report points to capital constraints and holding periods. As investors typically look to offload assets after a three-to-five year term, PE houses will take a moderate approach to digitisation to safeguard their investment, ensuring that solutions have been tested prior to commitment. Here, the report notes that, “The risk and costs of testing a very innovative solution will probably exceed the expected return in their typical time horizon.”

The digital revolution is having a  profound impact on the PE ecosystem

The Middle East, however, with its generally young demographic and quality infrastructure already in place is charging ahead in its digital advance. The consulting firm cites Bahrain, Kuwait and the UAE as examples of high levels of technology adoption by consumers in the region, with mobile subscription rates of over 90% marking the countries as among the most penetrated in the world.

And the digital disruption at a commercial level is already evident across almost every industry, with, for example, the rise of e-commerce giants and the fintech market changing the face of the retail and financial services sectors, along with AI and robotics in healthcare and customer data capture for fast-moving consumer goods (FMCG) enterprises.

As such, those who fail to adapt to these rapid changes are at risk of being left behind, warn the report’s authors. They state; “Overall, our survey suggests that PE houses recognise that they are at a crossroads here. They must balance the risks of adopting new technology against the opportunities it offers and the danger of failing to build the exit equity story.”

The move to adapt

Indeed, nearly three quarters of the PE houses surveyed now focus on a company’s digital maturity in assessments prior to acquisition – both as to the impact of digital in terms of opportunity as well as the potential for disruptive competition, and also at how digitisation could be used to optimise costs and/or revenues. Further down the line, 95% of the respondents consider digitisation as an important factor for exits and returns on investment. 

All in all, PE firms will have to increase their focus on the exit phase with regards to digital considerations before they make an initial investment. “Complacency is no longer an option. When you prepare to exit, you must already be digital. The digital revolution is already having a profound impact on the PE ecosystem, and there is no choice now but to embrace it,” the report, led by Erwan Colder, Middle East Transaction Services and Private Equity Leader, contends.

“Having a digital strategy is essential for ‘future proofing’ a company that wants to retain market share and stay ahead of the competition. Those who are nimble will reap the benefits of the value to be created through digitisation,” it says in conclusion. “The digital revolution has changed the way products and services are consumed. As the market continues to adapt to consumer demand, PE firms and portfolio companies must remain relevant by mirroring consumer behavior”.


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Survey reveals wide-spread RPA investment plans ahead of Middle East forum

15 January 2019

In the lead-up to this year’s Middle Eastern RPA and Intelligent Automation Forum, event host IQPC has found that four out of five cross-industry leaders are planning investment in RPA solutions within the coming eighteen months. 

Robotic process automation (RPA) is touted as a huge benefit to businesses, especially as to operations and in particular back-office functions such as finance, human resources, supply- chain, and contact-center and customer services. Previously, Hadoop estimated that companies could potentially save between $5 trillion to $7 trillion through the implementation of RPA technologies by 2025.

To shed some light on the current state of  regional RPA adoption in the run-up to this year’s EY-sponsored ‘Middle Eastern RPA and Intelligent Automation Forum’, the digitally-minded B2B event promotor IQPC has surveyed a number of senior leaders from pioneering firms across a variety of industries, including the financial services, real estate & construction, telecoms, IT, and oil & gas sectors.

All in all, the survey revealed that some 79 percent of respondents were planning investment into RPA solutions in the next six to eighteen months, while 15 percent of the companies had a budget ranging from $500,000 to $2 million for RPA and intelligent automation projects over that time span. Yet, while funding and plans are widely in place, just 20 percent said they had selected a solutions provider.Current areas of RPA investment Middle EastIn addition to the top bracket of investors, 17 percent of respondents stated an eighteen-month budget of a quarter of a million to half a million dollars, while 68 percent were budgeted for below $250,000. Meanwhile, following RPA solutions, investments would be most commonly targeted at digital workforce management (79%) and AI solutions (77%), with cognitive computing also attracting interest.

To date, just 6 percent of the companies surveyed had implemented a form of cognitive computing, which broadly describes technology able to simulate human thought patterns in a computerised model by bringing together a range of AI and machine learning capabilities. Over a third of companies however stated plans for future implementation, with a further 13 percent already in the pilot stage.

Perhaps most revealing, although in accord with recent a recent survey BCG survey which suggested Middle East companies are being slow to act on AI despite their positive embrace, is that 80 percent of those planning investment were yet to decide on an RPA solutions provider, said to be “looking for the right provider that can help automate the correct  process and be flexible in its application.”

Incidentally, forum sponsor Ernst & Young was recently assessed as the world’s leading provider for RPA services in a study by research firm HfS, followed by Capgemini and KPMG, with Accenture landing in fourth ahead of a further 25 assessed providers. Meanwhile, over half of the companies surveyed by IQPC stated that they were considering Business Process Outsourcers for their intelligent automation implementation.  

The 3rd annual ‘Middle Eastern RPA and Intelligent Automation Forum’ takes place on 19-20 February at the Meydan Hotel in Dubai – with RPA and AI leaders from AXA, ING, and Nokia among the range of confirmed speakers. With offices in Dubai and Doha among its ten international locations world-wide, IQPC offers approximately 2,000 innovation-focused conferences around the globe each year.