M&A activity in the MENA region booming
The total value of disclosed mergers and acquisitions (M&As) in the Middle East and North Africa (MENA) region rose from $ 7.3 billion in Q1 2012 to $14.6 billion in Q1 2013, increasing by 100 percent.
This is revealed in Ernst & Young’s MENA Mergers & Acquisitions update.
In Q1 2013, 98 deals were announced against 101 deals last year, a decline of 3 percent.
Phil Gandier, MENA head of Transaction Advisory Services at Ernst & Young MENA, said: “This increase can be attributed to growing investor confidence, improvement in the access to credit, relatively better convergence in pricing between investors and sellers and a hint of improved macro economic conditions. This is especially true of the markets and the sectors that saw the most deal activity — a trend that we expect to continue.” The UAE topped the region in terms of total value of disclosed domestic deals, comprising approximately 54 percent (worth $ 2.2 billion); followed by Qatar also at 21 percent (worth $ 880.4 million).
In the domestic space, the UAE also led the number of announced acquisitions with 11 deals.
Saudi Arabia, Qatar and Kuwait followed with seven acquisitions each.
The top 10 deals in Q1 2013 were valued at $ 12.1 billion which represented 83 percent of the total disclosed MENA M&A deal value.
Of these, five are outbound (regional business buying international assets), three are domestic (regional business buying regional assets) and two are inbound (international business buying regional assets).
The top deal by value was worth $6.4 billion, involving the acquisition of Orascom Telecom Holding n Egypt by Baskindale Limited in Cyprus followed by the merger of UAE-based Sorouh Real Estate and Aldar Properties for $ 2 billion.
These two deals comprised 69 percent of the top ten disclosed MENA M&A deals by value.
Inbound disclosed deal value increased from a negligible $ 400 million in Q1 2012 to $ 7.2 billion in Q1 2013, much of which can be attributed to the announcement of Baskindale’s acquisition of Orascom Telecom in Egypt for $ 6.4 billion.
The domestic disclosed deal value grew significantly by 171 percent in Q1 2013 compared with Q1 2012, largely on account of the merger of Aldar Properties and Sorouh Real Estate valued at $ 2 billion; while the outbound disclosed deal value showed a decrease of 39 percent.
In MENA, attractive sectors were banking and capital markets, and professional firms and services which led deal activity with eight deals each, followed by oil & gas with seven deals, consumer products with six deals and real estate and telecom with four deals each. The sector with the largest disclosed deal value was telecom, representing $ 7 billion.
For outbound announced deal activity, attractive sectors were telecommunications with five deals followed by real estate with four deals.
In the private equity space, 20 SWF/PE deals were announced in this quarter, out of 98 announced deals in Q1 2013 (20 percent of all announced deals).
The 20 SWF/PE deals comprised $ 1.6 billion of total disclosed deal value in 2013, with 40 percent of deals outbound.
“The coming months are likely to mirror how the rest of the year will stack up in terms of deal activity,” said Phil.
“There is increasing optimism globally with key deal drivers like corporate earnings, economic growth, and the quality and quantity of acquisition opportunities. This could bode well for outbound deals,” said Phil.
However, according to our Capital Confidence Barometer that tracks market sentiments, the level of optimism is MENA is lower due partly to continued tensions in some regional countries. Although this could have a dampening effect on deal activity, we are starting to see regional investors factor these risks in, ring fence them, and complete transactions,” said Phil.