Total mergers and acquisitions deal volumes in the Middle East and North Africa (MENA) region registered a rise of four percent last year, from 401 in 2010 to 416 in 2011, according to a report released by Ernst & Young.
Deal values on the other hand fell by 28 percent, from $44.1 billion in 2010 to $31.7 billion in 2011. The first half of 2011 experienced a higher average value of mergers and acquisition deals at approximately $10 billion as compared to the second half, which showed an average value of approximately $6 billion. Fourth quarter activity in 2011 experienced a considerable increase in total deal value compared to the third quarter, rising from $4.4 billion in the third quarter of 2011 to $7.2 billion in the fourth quarter of 2011, a jump of 64 percent. "A larger number of deals at smaller valuations signifies that asset values across the region have taken a tumble in light of the lower regional economic growth and also the projections for future growth.
One of the key obstacles slowing deal closures has been the continuation of the valuations gap between buyers and sellers. Once this discrepancy begins to narrow, we may begin to see deal closures picking up some pace. Sellers have acknowledged that future cash flows from their business stakes will not be as strong as they had hoped for and are now in the process of re-evaluating their options. These numbers indicate that 2012 will be favorable to buyers if they can add substantial value," said Phil Gandier, MENA Head of Transaction Advisory Services, Ernst & Young. UAE, Saudi Arabia The countries that saw the largest number of transactions in the domestic space in 2011 were the UAE (49 deals) and Saudi Arabia (44 deals).
In terms of deal value, countries that ranked highest were the UAE, comprising 40 percent ($3.9 billion) of total disclosed deal value in the domestic space in 2011; Saudi Arabia followed at 29 percent ($2.8 billion) and Kuwait at 11 percent ($1.1 billion). Outbound deals In terms of volume, domestic transactions outnumbered inbound and outbound deal activity, comprising about 54 percent of total announced deals in 2011. In terms of value, however, outbound deal activity held the greatest value among total announced deals, comprising $16.3 billion, or 51 percent of total announced deal value in 2011. By volume, outbound transactions came second after domestic deals in terms of dominance in mergers and acquisitions market activity, comprising 104 deals, or 25 percent of the total deal volume. Inbound deals, comparatively, held the lowest volume and value among total announced deals, comprising 88 deals, or 21 percent of total announced deal volume, and $5.6 billion or 18 percent of total announced deal value in 2011.
