A lack of sufficient private-equity capital is holding back the ability of small companies to grow and groom themselves for listing, says a regional industry head.

“Companies use private-equity professionals to help them turn the company around so they can get a fair valuation when they do list,” said Salah al-Fulaij, head of capital markets at the National Bank of Kuwait speaking at MEED’s Middle East Capital Markets conference.

“Prior to the crisis there was $7 billion of private-equity funds looking for investment in the region – I think that’s fallen to less than half that value, maybe even less than that. About 20 companies are now active in the market compared with the roughly 100 in existence before the crisis.” 

Al-Fulaij said he hoped private-equity firms would stage a comeback as they have an important role to play in the capital markets. 

“If the company isn’t transparent and ready to be traded then the individual investor simply ends up hurting the market,” he explained, before adding that there needed to be a recovery in the bank market for private equity to flourish once again.

Jarmo Kotilaine, chief economist at NCB Capital, agreed that private equity played an important role in the development of small companies looking to list in the future.

“There are a lot of SMEs, but they’re finding it difficult to grow as there isn’t nearly enough private-equity investment in the region,” said Kotilaine, also speaking at the conference. “So there is a real need for this issue to be addressed.”

MEED’s Middle East Capital Markets 2010 conference is being held at Yas Island in Abu Dhabi from the 25-26 October.