Target Segment

Midmarket companies constitute the backbone of the private sector in the MENA region. Reportedly, more than 80% of companies in this segment are established by families and first-generation entrepreneurs. They are typically businesses in services and light manufacturing with annual revenues standing at between $50m and $200m.

In general, these enterprises are exceptional performers in terms of revenue growth, cost containment, hands-on management practices, low leverage, employee retention, and a relatively strong pattern of internal generation of capital in the form of retained earnings. One reason for their success is the long-term commitment of their founders-owners. Short cuts are rarely implemented, risky decisions are seldom a practice, as they could cost the founders, not only their source of income, but their reputational capital, which has been built over a generation or two. Unlike large corporations or global franchises, they could only rely on their managerial proficiency, and the quality of their products & services to secure support from suppliers, or financing from banks, or to maintain loyalty with demanding customers.

In fact, the appeal of midmarket companies is precisely their size. Their larger counterparts provide their managers with ample means to weather difficulties, fund innovation/acquire technologies, and hire talent. When compared to larger enterprises, midmarket companies tend to be more agile, highly innovative, and in closer contact with their customers. Such companies are set for continued revenue growth, and this growth primarily derives from a continuous improvement of their business model: launching new services & products, putting more efforts into sales & marketing and focusing on operational efficiencies to sustain business needs.

The middle market segment in the MENA region is the hunting ground of a growth-equity PE firm such as Growthgate.