Abu Dhabi has led the way with consolidation in recent years as part of a trend that pre-dates the 2014 drop in oil prices.
The emirate’s two largest real estate developers, Aldar Properties and Sorouh Real Estate kicked off the consolidation drive when they merged in 2013. Then in 2017, government-controlled investment vehicles Mubadala and International Petroleum Investment Company (Ipic) merged and then, in 2018, absorbed Abu Dhabi Investment Council (Adic) as well.
At the same time, Abu Dhabi National Oil Company (Adnoc) consolidated its operating entities and formed units for activities such as drilling, refining, gas and onshore development.
For the banking sector, First Gulf Bank and National Bank of Abu Dhabi merged last year to form First Abu Dhabi Bank. Now, another three Abu Dhabi banks – Abu Dhabi Commercial Bank (ADCB), Union National Bank, and Al Hilal Bank – have confirmed they are in merger talks. The move has been broadly welcomed, with rating agency Moody’s Investors Service saying it is credit positive.
The question then turns to what comes next? The UAE has 60 banks serving a population of roughly 9.5 million and is widely regarded as being overbanked leaving plenty of scope for further mergers and acquisition (M&A) activity.
The consolidation will also spread to other sectors as more modest growth rates mean firms can no longer rely on organic growth to achieve their ambitions. As these pressures grow, M&A activity will continue to be a driving force across all aspects of the economy.
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