Dubai: The UAE has topped the Middle East and North Africa region in inbound mergers and acquisitions in terms of both number of deals and value of deals according EY [formerly Ernst & Young].
“The UAE dominated as the target country with the largest number and value of inbound mergers and acquisitions deals in Mena which points to the strong confidence of international investors in the UAE,” said Anil Menon, Mena M & A and IPO Leader at EY.
According to EY’s analysis of regional M & A data, 50 acquisitions targeting UAE based companies accounting for 21 per cent of the total domestic M & A deals were announced the region last year. In value terms too, the domestic deals targeting UAE based companies accounted for $7 billion (Dh25.7 billion) or 45.7 per cent of the overall regional domestic deals.
As an acquirer, the UAE accounted for 53 deals or 23 per cent of announced deals in the region while in value terms the country led the region with 46.4 per cent of deals worth $7.19 billion.
Overall the Mena M & A market will be led mainly by the GCC countries, namely the UAE, Saudi Arabia and Qatar.
The revival of Egypt’s M & A market in 2014 is expected to continue in 2015. Egypt made a strong come back in M & A deals last year as the country witnessed return of investments from international companies that are willing to bet on the long term future of Egypt. In the GCC Saudi Arabia, Qatar and Kuwait also showed improved deal flows last year. “Saudi Arabia will see a number of local family businesses looking to reconfigure their investments to focus more on their core businesses,” said Menon.
Announced Mena M & A deals rose by 6 per cent in 2014 to 468 deals from 442 deals in 2013 on the back of strong market fundamentals while the announced deal value decreased from $50.7 billion in 2013 to $44.9 billion in 2014, a decrease of 11 per cent.
EY sees M & A deal flows to pick up pace in 2015, building on the growth in the number of deals last year. The fourth quarter deal flow is seen as indicator of M & A pipeline in the region. The last quarter of 2014 ended the year strongly with 150 deals with a value of $16.2 billion, the highest value and number of announced deals in 2014. Compared to the same quarter in 2013, the fourth quarter announced deals doubled in value and increased by 26 per cent in number.
Positive trend
“The growth of Mena M & A is expected to continue in 2015 at a normalised year on year growth rate of up to 10 per cent. The majority of Mena M & A transactions tend to occur in consumption-led sectors such as food and beverage, retail, health care and education, which have little correlation to economic activity and changes in oil price, so the positive trend is expected to continue,” said Phil Gandier, Mena Head of Transaction Advisory Services at EY.
Last year also witnessed a big surge in outbound deals with the announced deal value increasing by 19 per cent from $18.5 billion in 2013 to $22 billion in 2014, signalling a return in the trend of outbound deals leading the Mena M & A market. Domestic and inbound announced deal values decreased by 31 per cent and 24 per cent respectively in 2014 compared with 2013.
“We expect to see outbound M & A deals continue to lead the market into 2015. With the exception of 2013, which saw domestic deal value exceed outbound deal value, outbound deals have historically been the most popular option for Mena investors. We expect investors to continue looking outside the region for investment, particularly in sectors such as real estate and oil and gas,” said Gandier.
Strong revival in the private equity and sovereign wealth fund-led investments saw about 90 deals from this segment last year. Going forward this sector is expected to be a key driver of regional deal flows.
“The total number of Mena deals in 2015 is expected to range from 400-500, continuing the same trend that we’ve seen in the past few years. We expect to see a lot PE equity deals in particular as an increasing number of PE firms will be seeking exits for their investments,” said Gandier.
