Middle East mergers and acquisitions volumes increase

26 July 2016

Region defies global decline in cross-border deals

The Middle East recorded higher volumes of inbound and outbound cross-border mergers and acquisitions (M&A) in the first half of 2016, despite a global decline, according to US law firm Baker & McKenzie’s Cross-Border M&A Index.

The value of deals fell significantly compared to the first half of 2016, a record year.

H1 2016 ME M&A

Middle East first half mergers & acquisitions

Source: Mergermarket, Baker & McKenzie

The UAE was the most active country for both inbound and outbound deals. It was the target for 12 of the 16 inbound deals.

The US was an important source of inbound M&A, with five deals worth $60m. Chinese companies became major players, closing three deals worth $1.4bn.

The most important inbound sector was energy and utilities, with three deals valued at $1.37bn.

“Cross-border M&A activity in the Middle East has fared relatively well in 2016 off the back of a record breaking 2015, despite the volatility across global economic markets,” said Will Seivewright, corporate & M&A partner at Baker & McKenzie Habib al-Mulla. “The underlying economic fundamentals, such as anticipated GDP growth in the UAE and Saudi Arabia, continue to draw investors to the region, and we expect cross-border deal activity to remain steady as organizations begin to strategically prepare for each country’s long-term development plans leading up to 2020 and beyond.”

Outbound M&A activity was also up, with 35 deals in the first half of 2015, compared to 33 in the same period in 2015. Among the key transactions was the Saudi Public Investment Fund (PIF)’s acquisition of a 5.6 per cent stake in Uber Technologies, for $3.5bn.

This made the technology sector the most important, recording two deals valued at $3.61bn. The consumer sector was the most active, recording four deals worth $193m.

UAE companies were most active with 17 deals, followed by Qatar’s eight deals and Saudi Arabia’s four.

The overall value of outbound deals fell sharply from $9.95bn in the first half of 2015 to $5.24bn so far in 2016. This was due to a drop in the number of megadeals worth billions of dollars.

“Risk factors continue to influence investment decisions, but we are already seeing more strategic and focused outbound investment from the Middle East,” added Zahi Younes, corporate & securities partner at Baker & McKenzie’s associate firm in Saudi Arabia. “GCC countries’ increasing efforts to diversify their investment portfolios will change the M&A landscape, allowing them to become key strategic investors around the world and enabling international investors to capitalize on opportunities.”

The report does not include Egypt, which is usually an active market for M&A.

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