Muscat: As many as 55 mergers and acquisition deals, worth $26.6 billion, have been reported in the Middle East region so far this year, according to Mergermarket, a global provider of M&A intelligence.
The values of the agreements have increased by 238.1 per cent, compared to the same period in 2015 (54 deals, $7.9 billion), while the deal count has remained consistent, noted a press release. The latest data has been released ahead of the Saudi Arabia M&A and Capital Markets Forum, to be held in Riyadh on November 16.
The value of the agreements was highly influenced by the largest transaction in the region so far this year - National Bank of Abu Dhabi PJSC’s (NBAD) $14.8 billion acquisition of UAE-based First Gulf Bank (FGB) - accounting for 55.6 per cent of the Middle East’s total M&A value, and pushing the Financial Services sector to the top of the industry rankings. The contract will come into effect in the first quarter of 2017 through a share swap, with FGB shareholders receiving 1.254 NBAD shares for each FGB share they hold. At that point, FGB will be delisted from the Abu Dhabi Securities Exchange.
Even without taking this agreement into account, Middle Eastern M&A activity (54 deals, $11.8 billion) would still have registered a 49.5 per cent value increase, year-on-year.
Deal-making in energy, mining and utilities experienced a clear drop in activity from 2015, with the sector’s share of the M&A market falling from 60.1 per cent to just 5.4 per cent ($4.7 billion to $1.4 billion) year-to-date.
Meanwhile, the transport and consumer sectors saw increased deal values, compared to the previous year. This trend was driven by German-based Hapag-Lloyd AG’s acquisition of United Arab Shipping Company for $5.4 billion, which helped boost the transport sector’s share to 20.6 per cent ($5.5 billion). Nine deals in the consumer sector contributed to a total value of $3.5 billion, up from just $175 million in 2015.
“Despite the drop in M&A in the historically strong Energy sector due to current political uncertainties in the region and relatively low oil prices, the deal pipeline looks strong going into the end of the year. There are even early indications that deal-making for the year will end stronger than in 2015, in part due to a couple of large transactions. Given the global context for M&A so far this year, this is no mean feat,” said Ruth McKee Al Ghamdi, Head of MENA at Mergermarket.
“We remain cautiously optimistic that the market will gain momentum with the positive news on the Saudi bond sale and potential bottoming of oil prices. The majority of MENA companies surveyed (67%) in EY’s latest Capital Confidence Barometer still have five or more deals in their pipeline, which indicates potential latent deal activity,” addedPhil Gandier, MENA Transaction Advisory Services Leader, at EY.
Mergermarket’s upcoming Saudi Arabia Forum will address the market’s most important deal drivers, as well as look ahead to key investment trends likely to be experienced in the coming year.