Middle East Private Equity Investment Group

Private Equity Investment Scope & Strategy - Overview

INVESTMENT SCOPE

Starling, having established itself as a highly respectable Middle East based investment company, possesses a deep and sophisticated level of knowledge in private equity gained through years of experience and study. This expertise makes Starling a valued partner to many of the world's most successful and experienced funds looking for ‘Qualified’ investment partners based in the Middle East presence, partnership and know-how.

Starling has developed mutually profitable long-term relationships with several global private equity funds. When appropriate, Starling may take advantage of co-investment opportunities in parallel with the limited partnerships in which it invests.

While continuing its strategy of investing in private equity funds focused on buyouts (MBO and LBO) and venture capital funds, Starling actively seeks a sufficiently diversified portfolio to allow for the management of investment risks. Most of the firm's investments are in select well-managed limited partnerships investing in quality companies and technologies.

DIVERSIFICATION

Starling diversifies geographically and through Leveraged Buyout (LBO/MBO) and venture capital allocations. Further diversification is achieved across various stages of development, industry and other criteria.

Geographically, the Starling portfolio is diversified across North America, Europe, Asia, Australia and the Middle East and North Africa (MENA) region.

In recent years Starling has identified the emerging markets of India, China and the MENA region as areas with significant promise for high risk adjusted returns and is increasingly expanding its exposure to this region.

Starling also diversifies its portfolio by making select direct investments in investment opportunities that fit the company’s investment strategy in conjunction with the funds or directly.

CHINA

Starling believes that the Chinese economy will continue to grow at a high rate (7-12%) over the next five to seven years. Such growth will enhance China’s status as a global manufacturing powerhouse and create significant opportunities for selective investment in high growth sectors. Starling also believes that Chinese government policies will become more open to private equity and intends to build its portfolio in the country by identifying strong private equity fund management teams.

INDIA

India possesses one of the world’s fastest growing economies, and Starling expects this trend to continue for some years to come. A strong export market, a talented, English-speaking workforce and increasing infrastructural investment will continue to attract foreign direct investment into India, thus creating significant opportunities for discerning investors. Starling intends to increase its exposure to Indian private equity, investing at a significant rate over the next few years.

MENA REGION

Rising oil prices and robust economic activity in the GCC and greater MENA region have allowed for many investment opportunities in both the private and publicly listed equity markets. Starling’s proximity to the Middle East/Gulf Co-Operation Council (GCC) region and its access to a substantial network of contacts have presented attractive investment opportunities which the company has actively pursued. Starling intends to continue to selectively identify further opportunities for making indirect and direct investments in this region.

DIRECT INVESTMENTS

Starling’s allocations are not entirely limited to Venture Capital and Buyout Funds. Starling has made and will continue to make direct investments, both co-investing with private equity funds but also directly into companies. Starling’s direct investment exposure has grown internationally and in the GCC region, where Starling enjoys significant advantages. Going forward, Starling will continue to pursue its growth strategy and identify direct investment opportunities which present:

A significant market opportunity
Potential for growth in sales, income and value
Strong, experienced and committed management
A drive to succeed

Starling’s direct investment portfolio includes investments in Emaar Properties PJSC, Emaar the Economic City, Al Salaam Bank and RAK Petroleum—in all of which Starling is a founder investor. Further, Starling has direct investments though its co-investment program in Vallent Technologies, US Foodservice and ServiceMaster.

PARTNERSHIP TERMS AND CONDITIONS

Starling usually invests in limited partnerships whose terms and conditions allow for the following:

A two-to-five year commitment period
Maximum partnership term of 10 years, with three years thereafter for dissolution
Preferred return (Hurdle Rate) of 8-10% annually
Carry split 20/80 or better in favour of limited partners
Target internal rate of return (IRR) of 25% or higher and a cash on cash multiple of 3x or higher, net to limited partners
Investment and advisory board criteria favourable to limited partners
Detailed reporting capability
Extent of General Partner's commitment and investment participation to be reviewed and agreed
Terms of parallel investment funds that will invest alongside the primary fund to be reviewed and agreed
Acceptable distribution methodology and clawback provisions
Stringent management accountability
Favourable diversification and debt restrictions

SELECTION PROCESS

Starling’s private equity investments are made principally through limited partnerships or co-investment opportunities alongside these partnerships, but Starling also makes direct investments in companies.

Starling receives an average of 140 investment proposals a year. The firm performs strict due diligence on 30 to 40 of these and typically invests in just three to five opportunities a year.

Due diligence generally takes between three to six weeks, but the process can be expedited if the situation calls for it.

Starling may employ third-party specialist firms to help evaluate investment partners and proposals submitted to the company for consideration. Investment proposals may be submitted to Starling either directly or through this website.

HOW MUCH WILL STARLING INVEST?

Commitments to private equity funds are typically made in increments of $5 million. Starling aims to commit no less than $5 million to any single fund, and is willing to commit up to $50 million to select individual funds.

Starling also actively seeks to participate in co-investment deals with its limited partnerships and make self-identified direct investments. Starling’s direct investment commitments have been as little as $1 million, but the company is willing to commit as much as $10 million in quality direct investments.

WHAT INVESTMENTS WILL STARLING NOT MAKE?

Starling, in accordance with its investment strategy, does not invest in derivatives, currencies, fund-of-funds, hedge funds and rarely invests directly in publicly traded companies. Starling will not invest in limited partnerships that finance businesses whose activities are not compatible with the Jawa family's ethical and religious beliefs. These include enterprises with significant interests in gaming, weaponry, pornography, pork products, tobacco and alcoholic beverages production and distribution.