Meet the Master of Mideast Buyouts

Dubai's Arif Naqvi is the top dealmaker in local private equity, an industry he helped create

By Stanley Reed, with Emily Thornton in Dubai

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“We are in the sweet spot,“ says Naqvi, seen as an ideal partner for U.S. buyout firms Aurore Belkin/Arab ianEye/Redux

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Abraaj backed GEMS, whose 60 for-profit schools serve the kids of locals and expats Matilde Gattoni/ArabianEye/Redux

It was among the most important lunches of Arif M. Naqvi's career. The founder of buyout firm Abraaj Capital met in mid-February with Nassef Sawiris, chief of Orascom Construction Industries. Over an okra-and-lamb stew called bamia at Sawiris' Cairo mansion on the Nile, Naqvi worked out terms for the sale of one of his companies, Egyptian Fertilizer. After two hours, Sawiris agreed to pay $2.69 billion. It was the biggest sale ever in the region by a private equity player.

Welcome to the Middle East, where buyout fever is rising even as it wanes in the West. It's the ideal environment. Economic growth remains torrid, stoked by oil exports. Cash is abundant. There are also plenty of companies with weak management teams and subpar financial operations, the hallmarks of a private equity target. "We are in the sweet spot," says 47-year-old Naqvi.

Over the past five years, Naqvi has built the Dubai-based Abraaj into the region's top firm, helping to make private equity a viable industry in the Middle East. Assets under management at Abraaj more than doubled in 2007, to $4.9 billion. Naqvi also sold five companies for $1.3 billion last year, returning $1 billion to investors. With his record, he's considered the consummate partner for U.S. buyout firms, which increasingly are sniffing around the region for opportunities. Investment bankers are also pushing Naqvi to take the firm public, an idea he's pondering. "I could double the size of the business in the next few years," says Naqvi, who owns an estimated 20% to 25% of Abraaj.

In many ways, Naqvi's rise has paralleled that of his adopted home, Dubai, where he lives with his wife and two sons. After stints at American Express Bank (AXP) in Pakistan and Arthur Andersen in London, Naqvi headed up business development for Saudi Arabian conglomerate Olayan Group in the early 1990s. He later pursued deals on his own, including a highly profitable investment in the Mideast assets of global retailer and distributor Inchcape Group.

Searching for his next move, Naqvi approached consulting firm McKinsey, which recommended starting a buyout shop. It was a gamble in 2002. At the time, oil prices languished around $25 a barrel. Business owners were wary of private equity firms, given their aggressive reputation in the West. And powerful local sheikhs and their merchant family allies dominated the local economies. That made Naqvi, the son of a factory owner in Karachi, Pakistan, the underdog.

Since then, Naqvi has built up a staff of 97 bankers and other professionals from 27 countries, taking advantage of the little emirate's tolerant and multicultural environment. When he's not crisscrossing the Gulf, Naqvi spends seven days a week at his office in the futuristic Emirates Towers complex. There, he'll often hit the Starbucks (SBUX) downstairs for a coffee before smoking a cigarette on a secluded patio. "[Naqvi] was the first person to focus on raising money for investment in the region," says Anshu Jain, head of Global Markets at Deutsche Bank (DB), which has a stake in Abraaj. "Five or six years ago that seemed crazy. Now it seems inspired."

Today Naqvi is an insider, doing business with some of the most influential people in the region, including Khalid bin Sultan, the son of Saudi Crown Prince Sultan. His contacts and experience are crucial when it comes to making deals happen; relationships are often more important than money in the Middle East. Last year, Abraaj plowed some $1.6 billion into companies, including GEMS, a Dubai-based network of some 60 for-profit schools for children of locals and expats. "Unlike in the [West], people in the Gulf have to be seduced into selling," says Kito de Boer, McKinsey's managing director for the Middle East. "They won't just go for the highest bidder."