Number of M&A deals increase during first quarter

16 May 2012

Value of deals still stagnant, but on the up

Merger and acquisition (M&A) activity targetting businesses in the Middle East and North Africa (Mena) is on the rise, according to US ratings agency Standard & Poor’s (S&P).

The number of successful M&A targeted in the Mena region reached 124 in the first quarter of 2012, up 1.6 per cent since the fourth quarter of 2011 and 11 per cent in the same period last year.

“M&A activity has not reached the levels seen in 2007 or 2008 in terms of the number of deals or dollars, but we have to take into account where we are starting from,” says Richard Peterson, director of global markets intelligence at S&P Capital IQ.

M&A transactions have been slowly picking up since 2009, but stalled in the first half of 2011 with the regional political turmoil, which left many deals postponed or cancelled. The sovereign credit issues in Europe also impeded on M&A activity in the region.

In the first quarter of this year, the 124 transactions were valued at $6.41bn, but it is still 54 per cent lower than the $13.9bn generated from the 112 transactions in the first quarter of 2011.

“This quarter marks the third consecutive quarter of rising activity. Now we are seeing accession again,” says Peterson.

Another catalyst for the rise in activity is the region’s geographical position.

“The Middle East is a foothold to other regions. So from Dubai or Abu Dhabi, there is trade to China and Africa. Perhaps, 10 years from now, this will change the landscape,” says Peterson.

Most of the transactions continue to target the financial, industrial and consumer good sectors, but healthcare is fast picking up interest.

Of the 463 M&A transactions in 2011, more than 40 per cent comprised buyers from Europe. Most of the transactions were valued at less than $100m, which highlights that Mena buyers are also reluctant to make large deals.

While Europe remains the dominant buyer in the Mena region, US buyers are returning to the market with the biggest US transaction being Coca-Cola Company’s acquisition of Saudi Arabia’s Aujan Industries for $980m in December last year.  

“Buyers in the US are looking for regions that have strong growth and they are finding it in this area,” says Peterson.

The highest-ever number of M&A transactions recorded was in the first quarter of 2008 with 171 transactions, but the fourth quarter of 2007 witnessed the highest value with transactions for the quarter worth $27.1bn.

Buyers in the Mena region continue to target the region itself, with Europe ranking second place for number of M&A targets by the region’s buyers.

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