Mergers and acquisitions (M&A) deals in the Middle East fell to just 60 completed deals in the third quarter of 2011, a 79 per cent fall on the same period in 2010, according to data compiled by UK-based Zephyr.

The fall marks a further drop on second quarter of the year when 99 deals were completed, worth in total $6.47bn

“The number of deals with targets based in the Middle East looks set to reach the lowest level since 2006 this year,” says Amy Morris, senior writer at Zephyr.

“So far there have been 349 such transactions [in 2011], compared with 937 in 2010 and 617 in 2009. This total includes private equity and venture investments, M&A activity and equity raisings,”

The effects of the Arab Spring have had a significant impact on the number of transactions that have taken place this year.

The first quarter of 2011 did not fair too badly in light of the unrest in Tunisia and Egypt at the time with 139 transactions completed worth in total $3.76bn. However the situation worsened over the second quarter with 99 deals completed although they were worth more at $6.47bn.

Reginoal M&A activity
  Number of deals Total deal value ($m)
Q3 2009 100 1,997
Q4 2009 186 4,190
Q1 2010 206 9,040
Q2 2010 244 4,279
Q3 2010 281 1,959
Q4 2010 199 5,183
Q1 2011 139 3,763
Q2 2011 99 6,470
Q3 2011 60 1,593
Source: Zephyr

Third quarter results have shown no signs of improvement. It is traditionally one of the slowest quarters due to the summer months and Ramadan, but there is also little hope going into the fourth quarter, the region is still suffering from the uncertainty in countries affected by the Arab Spring and the capital markets continue to fall as the global financial difficulties and foreign investors continue to leave the region to invest in safer markets.

Jordan is the most frequently targeted country in the region accounting for 63 per cent of all transactions in the third quarter. Although the value of deals were highest in Qatar, amounting to $812m in the third quarter.

The banking and construction sectors continue to attract the most amount of investment with the post and telecommunications receiving no investment in the third quarter, a pattern also seen in the second quarter of this year.

So far this year January has seen the most transactions with 58 followed by March with 44 and then May with 40.

May’s transactions have been worth the most with $4.7bn of which $3.49bn was the Qatar National Bank rights issue.  The largest M&A deal this year was worth $1.09bn when the UAE’s Centurion Investment purchased 40 per cent of Abu Dhabi-based New Medical Centre Healthcare in January.

 “Middle East deal volume is being driven down by a lack of private equity investment. While regional investors are putting more money into the Americas, there are issues holding back domestic deals, such as difficulties in matching buyer and seller price expectations,” says Morris.