On 14 December, Coca-Cola announced a nearly $1bn deal to invest in a soft drinks company in Saudi Arabia. It was one of the few bright spots in an otherwise dismal year for regional mergers and acquisitions (M&A) activity.

In 2011, only about $13bn of deals have been concluded, according to data provider Zephyr. That is down from a peak of about $54bn in 2008. The anti-government protests that have erupted around the region no doubt played a part in depressing sentiment, but economic factors continue to play a big part.

Company owners in the Middle East generally have an unrealistic view of the worth of their businesses. Coupled with that, many banks have tried to avoid pressuring management into making tough decisions, such as forcing them to sell off assets. A lack of liquidity in the banking system also makes it difficult to finance acquisitions, especially when valuations are still inflated and economic prospects do not look good.

Next year, banks are expected to get tougher with troubled companies, which could force a few more deals to be done, but the financing situation and the economic outlook will remain the same.

The relatively high oil price will ensure that producers in the region continue to build large surpluses, a substantial chunk of which will be invested outside the region. As this capital flows from the region, businesses in the Middle East are in desperate need of it. Foreign direct investment into the Middle East is expected to drop in 2011 and 2012.

For bankers in the region that is bad news. Many international banks brought out teams of people expecting a wave of M&A and flotations to advise on. Few of them have found compelling reasons to stay, most of them will have to keep waiting.