Robert here …

I just arrived back home yesterday after a very productive, interesting, and also fun month-long work trip in Dubai. I was very tempted to extend the trip one more week after being invited to attend the Super Return private equity conference, but unfortunately I had prior business commitments in the US.

In two weeks Robert and I will be in Tokyo for a week and I will be staying in Asia for another month long trip, so the posts will revert back to an Asia focus for a while. As Robert and I mentioned in a recent AmLaw article, “Where Do I Send My Resume”, by Brian Baxter, firms have become much more selective when considering laterals in busy overseas markets, but we continue to make placements in HK / China, Japan, Singapore, Russia and the UAE, and our substantial time spent on the ground in these markets is critical to our success, especially considering the global economic crisis.

For example, being in Dubai for the past month, and meeting with a number of senior attorneys and other industry leaders, as well as just living there in general, allows for a more accurate reading of the level of confidence in the market. I came away feeling very positive about Dubai and the region in general. We will be able to continue to place our candidates there in the short-term and we are not at all worried about the long-term. In fact, we have four candidates interviewing in Dubai and Abu Dhabi next week, who are fly-ins from US, as well as three placements there in the past six weeks (all from the US) so there is still a lot of lateral activity in the UAE, as well as the region in general. The bottom line is that associate candidates with impressive academics and firm experience can land in the Middle East at top US firms, even if they only speak English and have no previous connection to the region, notwithstanding the global downturn.

I have been told that the level of enthusiasm at Super Return this week has not been as high as in the past because the somber reality of the challenges ahead in the market have dominated the atmosphere. This has obscured the mood of the featured guests, all leaders of US private equity firms such as KKR’s Henry Kravis, Blackstone’s Steve Schwarzman, and Carlyle’s David Rubenstein, among other industry notables. But Robert reminded me that even at a Super Returns event he attended in Asia in 2006, at what appears now to have been the height of the recent private equity boom, keynote speaker David Bonderman alarmed the crowd with a very somber message: “Most of you won’t be alive as private equity firms in a couple of years was his direct message,” according to Robert. Reports of the death of the private equity market at that time were premature, obviously, and (poor recent returns notwithstanding) big names are in attendance in Dubai because they expect to continue to do deals. So our clients are there too, including leading partners from various top private equity practices of US and British firms, flying in from all over the world. By all accounts, from the Middle East perspective, things are potentially looking great in the private equity market.

The deals they will do will increasingly be in the Gulf Region. Commenting on his company’s sponsorship of the event, Zulfi Hydari, Managing Director of HBG Holdings, said, “Super Return Middle East is the premier event for the regional private equity sector and forms part of a highly influential series across Europe and the Far East…The GCC economies, with their immense financial reserves and exceptional demand-driven growth, are in a unique position to capitalize on the new economic realities.” Gary Long, President and CEO of Investcorp, a New York and London based private equity firm with $1.1 billion to spend, stated in his speech at the conference, “Certainly alternative investment firms like Investcorp are being negatively impacted by the financial turmoil. For example, dealflow is down, leverage is a lot more difficult… and returns are under pressure…That’s true for private equity, that’s true for hedge funds, and that’s true for real estate investing… So it definitely feels like a recession to us and has felt like a recession for many months now… While the Western private equity environment is very difficult, in the Gulf, it continues to grow and mature and prosper. It is the golden age for private equity in the Gulf. I’m very bullish about opportunities for private equity in the Gulf.” What is interesting about this is that Investcorp’s private equity team has previously focused only on Western Europe and the North America

So western based private equity firms are no longer simply seeking large investments from the cash rich Gulf region, which had always been their motive in Middle East, but they are now looking for deal partners, lenders, shareholders, as well as to set up funds and invest in the region. Up until the devastating turn in the global financial markets in recent months, the booming sovereign wealth funds of the Middle East were focusing a lot of their investment abroad. They have taken a big hit on investment in the US (such as the MGM CityCenter project in Las Vegas) and other western markets and will perhaps invest more in the local region now.

Although I just missed Super Return, I was fortunate to have attended Cityscape Dubai 2008 last week, the world’s largest business-to-business real estate and investment event. The atmosphere at the event, regarding continued foreign investment and major project financing at a high level in the region, was very positive and I will let you know all about it in the 2nd half of this post, set for tomorrow…

TO BE CONTINUED….