Target Segment

At first glance, the term “middle market segment” is not likely to be a headline grabber. At a closer look, 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 actions or hasty decisions are seldom practice, as they could cost the founders not only their main source of income but their reputational capital, which is a hard and rare currency for such entities. They cannot count on a global brand, or the strength of a franchise or the support of government (as in the case with State-owned enterprises) to secure credit with suppliers, or financing with banks, or enduring loyalty with demanding customers.

In fact, the appeal of midmarket companies is precisely their size. Their larger competitors provide their managers with deeper pockets for weathering difficulties, funding innovation and hiring key talent. Those compared with larger enterprises they tend to be more agile, and in closer contact with customers. Such companies are set for continued revenue growth, and this growth is mostly coming from continuous efforts: launching new services, putting more efforts into sales and marketing and focusing on operational efficiencies to sustain business needs.

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