Colony Capital acquires Abraaj's Latin American private equity arm

29 January 2019 Consultancy.lat

The Middle East’s largest private equity firm, Abraaj Group, has sold its private equity business in Latin America to Colony Capital, a US headquartered investment management firm. The deal comes months after Colony Capital already acquired Abraaj’s fund-management businesses in Latin America, as well as in Sub-Saharan Africa, North Africa and Turkey.

Founded 16 years ago by former Arthur Andersen accountant Arif Naqvi, up until the start of 2018 Abraaj Group was one of Middle East’s most illustrious companies, having grown into the region’s most influential emerging-market investor and private equity dealmaker with assets under management of over $13 billion. The investment firm enjoyed a  large global backing – investors, family offices, foundations, sovereign wealth funds and pension funds, including the likes of the World Bank, CDC Group, Proparco Group, Philips and the Bill & Melinda Gates Foundation, the world’s private philanthropic organization. 

In the space of just six months however, the Dubai-based firm’s fortunes took a dramatic turn following allegations that money in the company’s $1 billion health fund had been misused. Reports also surfaced about Abraaj’s fraudulent financial figures. A report released by PwC months later found that the company’s main revenues hadn’t covered its operating costs for years. The firm had structurally borrowed new funds to fill the gaps, and owed creditors over $1 billion. The revelations brought Abraaj under immense pressure, and in June last year the company filed for provisional liquidation in the Cayman Islands, where the firm formally is registered.

Colony Capital acquires Abraaj's Latin American private equity arm

Since then, Abraaj Group has become one of the Middle East’s largest restructuring and bankruptcy cases in history. Several consultancies were brought in to guide the process, including two AlixPartners (which oversaw the separation of the health-fund) and Alvarez & Marsal (to recover funds) – both firms are restructuring specialists and rank among the top consulting firms for turnaround globally, including in Brazil. Meanwhile, Big Four giants Deloitte and PricewaterhouseCoopers (PwC) were appointed by the court to oversee Abraaj’s restructuring and divestments to interested buyers.

Abraaj’s Latin American private equity business

One of the deals which emerged out of Abraaj’s separation was the sale of Abraaj's key funds in Latin America, Africa and Turkey to Colony Capital, a New York headquartered investment manager with over 400 employees across 17 locations globally. Among the funds acquired by Colony Capital were the Abraaj Latin America Fund II, which has assets of $545 million, the Abraaj Turkey Fund I with $526 million, the Abraaj North Africa Fund II with assets of $375 million, and the Abraaj Africa Fund III, which has assets of $990 million. “We’re delighted to have crafted this comprehensive global solution for Abraaj and its stakeholders and sincerely hope that this can enable the process of rebuilding on all sides,” said Colony Capital’s Executive Chairman Tom Barrack in the statement. 

Now, seven months down the line, Colony Capital has made a second swoop for part of Abraaj's business – this time round the US business has acquired the firm’s private equity unit in Latin America. Since establishing in the region in 2006, Abraaj's unit has deployed over $700 million across 22 investments, and currently manages over $500 million of assets. The company focuses on growth equity investments in middle-market companies, with Mexico, Colombia, Peru and Chile the main countries targeted. “The business has established itself as a premier private equity investor across Latin America,” remarked Justin Chang, Managing Director and Global Head of Private Equity for Colony Capital.

As part of the deal, which was supported by liquidators Deloitte and PwC, Abraaj's senior management team in Latin America – Miguel Angel Olea Sisniega, Hector Martinez Fry, Gerardo Mendoza Llanes and Eduardo Cortina Murrieta – will transfer to Colony Capital and continue to lead the operations. “We are confident that our partnership with Colony Capital is the best decision for the company, our investors and for our professional growth,” said Sisniega.

Related: M&A forecasted to slow in unstable Latin America political climate.

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