Middle East deals rise for first time in three years

23 January 2013

Middle East mergers and acquisitions rise to highest levels since 2008

The value of mergers and acquisitions (M&A) activity in the Middle East rose in 2012 for the first time in three years, reaching the highest level since 2008.

The total value of M&As announced in 2012 hit $25bn, an increase of 76 per cent on the value of deals completed in 2011 and a reversal of declining activity since the onset of the financial crisis.

While the value of transactions rose, the number of them fell, according to figures from M&A tracker Bureau van Dijk. The number of deals in 2012 was 315, down from 418 in 2011.

Eight large deals of more than $1bn in value helped boost the figures above previous years volumes, but activity is still significantly below 2007-08 levels, when more than $50bn-worth of M&A transactions were announced each year. The total for the eight largest acquisitions of 2012 topped $17bn.

The largest transaction of 2012 was the acquisition of a 19 per cent stake in Industries Qatar by the local General Retirement and Social Insurance Authority from Qatar Petroleum. That deal was valued at almost $4bn. Qatar has become one of the most active countries for M&As, and in 2012 there were $6.7bn of transactions targeting Qatari firms. Kuwait was the most active country, with $6.8bn-worth of deals, mostly taking the form of investors acquiring minority stakes in Kuwaiti firms.

For the Middle East and North Africa (Mena) region, the value of M&As rose to almost $45bn in 2012, up from $30bn in 2011. That has been driven in part by several large acquisitions of Egyptian banks, most notably Qatar National Bank’s $2.6bn acquisition of Egypt’s National Societe Generale Bank, previously owned by France’s Societe Generale.

In contrast, global deal volumes have fallen in 2012 for a fifth consecutive year, in large part due to weak markets in North America, Europe, the Far East and Central Asia. Global M&A values fell to $3,144bn across 65,060 transactions, the lowest in terms of volume and value since 2004.

The New Year has also got off to a good start for the Middle East, with the announcement in mid-January that Abu Dhabi real estate companies Aldar and Sorouh have agreed a merger that will create a combined entity with $15bn in assets. It is one of the largest ever M&A transactions in the region.

Despite this, bankers and private equity firms say asset valuations in the Middle East remain too high for a significant pick-up in M&A transactions, and that the availability of funding from banks is also too constrained. This particularly weighs on the private equity industry, which has struggled to regain momentum since 2008 when $1.7bn-worth of deals were completed. In 2012, that had dropped to just $805m.

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