Mena M&A deals surge to record value

Dubai - Merger and acquisition deal value in Mena jumped 68.7 per cent to reacg $26.76 billion in 2018

Merger and acquisition targeting Middle East and North Africa in 2019 has already surpassed all annual totals following the $70.4 billion Saudi Aramco-Sabic megamerger, the second largest M&A deal globally so far this year, according to Mergermarket data.
"Even excluding the Saudi deal, M&A in the region would have reached its second highest quarterly value on record," Mergermarket said.
High-profile deals involving Abu Dhabi National Oil Company (Adnoc) have been key to the increase, including the sale of Adnoc Oil Pipelines to KKR and BlackRock for $4 billion, marking the firm's largest divestment on Mergermarket record. The region also saw the $4 billion deal between the UAE banks Abu Dhabi Commercial Bank and Union National Bank. The move marks the second domestic banking merger in a matter of months, following the tie-up between Saudi British Bank and Alawwal Bank in October for $4.7 billion.
In 2018, merger and acquisition deal value in Mena jumped 68.7 per cent to $26.76 billion, compared with $15.86 billion in 2017, driven by increased deal-making in the UAE, which more than doubled to $10.4 billion in 2018, as well as blockbuster deals in Saudi Arabia and North Africa. "With the region appearing to be sheltered away from macroeconomic issues elsewhere, foreign investment has seen a noticeable uptick, bucking the global trend. A total of 22 inbound deals worth $14 billion were registered in first quarter, following deals such as Uber's acquisition of rival Careem Networks. Domestic consolidation was also on the rise with a 21 domestic deals- up from 14 in fourth quarter 2018. However, with increasing protectionist measures across much of the Western world outbound M&A figures for first quarter 2019 paint a slightly different picture. While the value and volume (16 deals, $2.6 billion) increased from the final quarter of 2018, the figures remain relatively low compared to recent years," Mergermarket said.
"M&A activity in 2019 is off to a solid start. We expect 2019 to be a strong year for M&A activity due to consolidation in select sectors, and strategic buying by sovereigns and national oil companies, and increased capital allocation in the technology sector. This combined with a more balanced bid/ask spread in terms of deal valuations is propelling M&A activity," said Anil Menon, MenaM&A and Equity Capital Markets Leader, EY.
Asar Mashkoor, Managing Director at Emirates NBD, said the region has always had liquidity. "What we are seeing now is that seller expectations of value are reasonable, and buyers are positioning themselves for an improvement in sentiment. At the same time, banks are keen to diversify away from traditional sectors and willing to help finance M&A transactions. We expect this trend to continue in the medium term."
"The significant uptick in M&A activity in the Middle East in the first quarter of this year has been largely due to a number of mega mergers and consolidations across key sectors driving economic growth, including financial services, technology and industrials," said Omar Momany, Partner, Baker McKenzie.
" Despite the volatility of global markets in 2018, strong economic fundamentals, improvement in oil prices, and rising production growth continue to draw investors to the Middle East. With governments such as the UAE and Saudi Arabia taking steps to enhance their foreign direct investment regimes and diversify their economies, we expect a healthy level of M&A activity in the region for the rest of 2019," said Momany.
"Early-stage M&A activity in Mena virtual data rooms increased by 23 per cent year-over-year over the past two quarters, indicating that the Mena region is set for very healthy levels of announced M&A deal count growth throughout 2019," said Pete Frintzilas, Senior Vice President, SS&C Intralinks.
Analysts see a surge of interest from private equity in energy, consumer and education opportunities. Infrastructure and renewable deals continue to drive interest. The region increasingly looks to diversify out of an over-reliance on traditional energy sources and as its population becomes more westernsed in habits consumer, education and health sectors are expected to see further growth.
Gamal M. Abouali, partner, Abu Dhabi, Cleary Gottlieb Steen & Hamilton LLP, said while deal volume in Middle Eastern private equity remains subdued, participation of GCC sovereign wealth funds in outbound private equity investments in Europe, North America, and Asia continues to be robust. "GCC institutions are increasingly carrying out co-investments and direct investments, as opposed to passive fund stakes, which means the region will help shape private equity activity globally."
- issacjohn@khaleejtimes.com