Mergers & Acquisitions (M&A) deals announced in the Middle East and North Africa region dropped by 54 per cent in value to US$7.14 billion in the third quarter of 2009 compared to deals worth US$15.64 billion announced in the same period last year, according to Ernst & Young’s quarterly Middle East update.
M&A activity has also fallen 26 per cent in terms of the actual number of announced deals. A total of 97 deals were announced in the third quarter of 2009 against 134 in the third quarter of 2008. Within these disclosed deals, the number of outbound deals was down from 42 in Q3 2008 to 25 in Q3 2009, a drop of 40 per cent, while domestic deals fell from 75 to 53. However, the number of inbound deals increased marginally from 17 in Q3 of last year to 19 in the third quarter of 2009 - an increase of 12 per cent.
The value of the domestic deals dropped by 60 per cent from US$6.3 billion in Q3 2008 to US$2.55 billion in Q3 2009 and the value of outbound deals also fell by 54 per cent, from US$8.95 billion in the third quarter of last year to US$4.15 billion in the same period in 2009.
Average deal size also fell from US$184 million in Q3 2008 to US$166 million in Q3 2009. Deals with size greater than US$500 million have dropped from 9 per cent to 7 per cent in value terms during the same period. The update reveals that deals less than US$100 million decreased marginally from 64 per cent in Q3 2008 to 63 per cent in Q3 of 2009. An increasing trend was observed towards medium sized deals (deals valued between US$100–500 million) which rose from 27 per cent in the third quarter of 2008 to 30 per cent in the same period in 2009.
Phil Gandier, Head of Transaction Advisory Services at Ernst & Young Middle East said: “Saudi Arabia topped the country charts for the number of M&A deals with 14, followed by the UAE and Kuwait, both at 11. Jordan and Egypt had 10 and 8 deals respectively. The top sectors were banking and financial services and diversified industrial products, both with nine deals followed by oil & gas with eight and asset management with seven deals.”
UAE-based Advanced Technology Investment Company’s acquisition of Singapore-based Chartered Semiconductor at US$1.8 billion was the largest deal in Q3 2009. This was followed by a Moroccan domestic transaction wherein RMA Watanya, Fipar Holding and FinanceCom acquired Medi Telecom for US$1.13 billion.
He added: “The number of domestic transactions comprised almost 55 per cent of the total M&A activity followed by inbound and outbound deals at 25 per cent and 20 per cent respectively.” The continued easing up of liquidity in the regional marketplace has the potential to reverse the declining trend in domestic and outbound deals. Regional companies are also looking to focus on core competencies that could see them shedding non-core assets to regional or foreign buyers. The coming year will see regional companies shake off the impact of the global downturn, sell their under-performing assets and then look for acquisitions in areas of their core competence.