The number of mergers and acquisitions (M&As) in the Middle East and North Africa (Mena) region dropped in the fourth quarter of 2013.

Total deal value was down more than 80 per cent on the previous quarter, and around 65 per cent lower year-on-year, research by law firm Allen & Overy shows. Quarterly deal volume declined 20 per cent.

While the amount of deals in 2013 was lower than in previous years, it registered the highest total deal value since 2007 in the region, an increase of 30 per cent compared to 2012.

The majority can be attributed to a handful of large deals, however, including the $5.8bn merger of Aldar Properties and Sorouh Real Estate, the merger of Dubai Aluminium (Dubal) and Emirates Aluminium (Emal) to create the $15bn Emirates Global Aluminium, and Etisalat’s agreement with Vivendi to acquire a 53 per cent stake in Maroc Telecom, in a deal worth €4.2bn.

In the fourth quarter of 2013, notable deals included the reverse takeover of Ammalay Commodities JLT by Gems TV Holdings for $461m and Al-Qurain Petrochemical Industries’ $232m acquisition of a 29 per cent stake in the Saudia Dairy & Foodstuff Company.

“While the limited deal flow of Q4 makes spotting trends somewhat challenging, there is evidence to suggest that investor confidence is on the up. This, coupled with private equity cycles ending (and new ones beginning), and increased liquidity among regional banks, indicates that 2014 may start in a way that 2013 failed to finish,” said the report.

It adds that “many expect M&A activity in the short to medium term to be concentrated in the relatively stable markets of the GCC, particularly Saudi Arabia and the UAE. There are signs however that investors (particularly those based in the region) are prepared to look at the more volatile markets for quality assets.”

The acquisition by Arab Petroleum Investments Corporation (Apicorp) of a 10 per cent stake in Egyptian Methanex Methanol Company from Methanex Corporation is noted as an example of this increased appetite for riskier regions.

Half of the region’s deals (51.4 per cent) in 2013 consisted of private M&A, while a quarter (24.3 per cent) were divestments. A fifth of deals (21.6 per cent) were in the form of acquisitions, and the remaining 2.7 per cent consisted of joint ventures.