UAE Dominates the Middle East's M&A Field

Published July 18th, 2018 - 11:13 GMT
The value of cross-regional deals targeting the Middle East increased to $8.1 billion in 2018 first half from $6.4 billion in the same 2017 period. (Shutterstock)
The value of cross-regional deals targeting the Middle East increased to $8.1 billion in 2018 first half from $6.4 billion in the same 2017 period. (Shutterstock)

The UAE continued to drive both inbound and outbound merger and acquisition activity in the Middle East as the regional M&A deal values increased by 62 per cent year-on-year in the first half, according to data revealed by Baker McKenzie Report on Tuesday.

As the Middle East sustained robust market activity in the first half of 2018 compared to the same 2017 period, overall global deal values rose by 59 per cent year-on-year, despite volumes falling by 12 per cent, according to the latest report by the global law firm.

Sixty-five per cent of all Middle East M&A activity was cross-border in nature in the first half and the UAE continued to drive both inbound and outbound M&A in the region. The aggregate value of all Middle East M&A rose to $25.4 billion, with deal volume remaining at similar levels, from $15.7 billion in the same 20017 period, said the report. "Cross-regional M&A deal activity also increased by value (up 22 per cent) and volume (up 13 per cent) in the first half 2018 compared to the same 2017 period, with Emirates NBD Bank's $3.2 billion acquisition of Turkey-based Denizbank ranked as the top cross-regional deal during the period," said the report.

Domestic deal values in the first half spiked three-fold compared to the same 2017 period, driven largely by the pending $5 billion merger of Saudi Arabia British Bank (SABB) and Alawwal Bank in Saudi Arabia.

"Overall Middle East activity has been strong in the first half, with a significant uptick in aggregate values for both domestic and cross-regional deals compared to the same period last year," said Omar Momany, head of Corporate/M&A at Baker McKenzie Habib Al Mulla, based in the UAE.

"With a handful of standout mega deals and the governments across the Middle East cantering to implement investor-friendly reforms and policies, the region is set to experience promising levels of M&A activity in the second half of the year," said Momany.

The value of cross-regional deals targeting the Middle East increased to $8.1 billion in 2018 first half from $6.4 billion in the same 2017 period, with a striking 174 per cent increase in the first half of the year compared to the end of the second half of 2017. Inbound deal activity was driven by the acquisitions of Abu Dhabi National Oil Company's oil field concessions by Austria's OMG AV and French oil and gas giant Total, amounting to $2.6 billion. Deal volume also rose by 26 per cent in H1 2018 with a total of 54 inbound deals, compared to H1 2017.

The UAE was the most attractive target country to overseas investors in first half 2018, with a total of 34 inbound deals valued at $6.6 billion. India and France were the top acquirer countries by volume, with seven deals each, while Austria was the top acquirer country by value, investing $1.5 billion on one of the Abu Dhabi oilfield concessions.

The Energy & Power sector was the most attractive target sector in respect of inbound Middle East investment, both by volume and value, with a total of 15 deals amounting to $7.4 billion.

"We continue to see healthy investor appetite and deployment of capital into the Middle East, particularly in the UAE with its strong underlying economic fundamentals and openness to foreign investment," said Will Seivewright, Corporate/M&A partner at Baker McKenzie Habib Al Mulla, based in the UAE.

The value of cross-regional deals targeting the Middle East increased to $8.1 billion in 2018 first half from $6.4 billion in the same 2017 period.

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By value, outbound cross-regional deals from the Middle East increased by 20 per cent to $7.6 billion in 2018 first half from $6.3 billion in the same 2017 compared. Deal volume was also up by nine per cent with a total of 82 outbound deals, compared to the first half of 2017.

The UAE was the most active acquirer country both by volume and value in H1 2018, comprising more than 75 per cent of the total value of cross-regional deals originating from the Middle East, with $5.8 billion out of 35 outbound deals. The US was the top target country by volume with 13 deals, while Turkey was the top target country by value as a result of the $3.2 billion acquisition of Turkey-based Denizbank SA by Emirates NBD Bank.

Data released by Thomson Reuters recently also support the strong show of M&A activity in the region. Merger and acquisition transactions with Middle Eastern and North African involvement reached an eight-year high $33.9 billion during Q2 2018, up 74 per cent in compared to the same 2017 period.

Deals with a Middle Eastern and North African target reached an all-time high rising to $21.3 billion, up 110 per cent from the same period in 2017 while inter-Mena or domestic deals reached a five-year high, also up 232 per cent from year-on-year, according to by Thomson Reuters report.

"Driven by Saudi British Bank acquisition of the entire share of capital of Alawwal Bank for $5 billion, Mena inbound M&A currently stands at an all-time high. On the other hand, outbound M&A decreased from $6.9 billion in Q2 2017 to $6.6 billion so far this year," Thomson Reuters said in a report.

Globally, the United States continued to be the most acquisitive and targeted region in 2018 first half with cross-border deal-making generating $419 billion, a 51 per cent increase from the same period in 2017. In the United Kingdom, cross-border and domestic deal values spiked by a staggering 130 per cent and 96 per cent respectively, as the country explores investments abroad in the wake of Brexit developments. Chinese cross-border deal activity also made headway despite tighter scrutiny on Chinese transactions, with inbound deals amounting to $33 billion and outbound deals totalling $75.9 billion, the report said.

The high technology sector was the big winner in terms of total global deal volume, representing an 18 per cent share. However, the Energy & Power sector attracted the highest aggregate deal value of $379 billion, accounting for 15 per cent of the total global deal value globally, said the report.

By Issac John


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