Dubai: The value of mergers and acquisitions (M&A) activity targeting the Middle East fell by 38 per cent in the first half of 2010 despite an 86 per cent increase in volume, according to the Zephyr M&A Report for the first half of this year.
The first half figures indicate a drastic fall in deal values across the region. The total deal value for the region amounted to $11.91 billion (Dh43.7 billion) in the first half, marginally up from $11.42 billion in the same period last year and substantially down from $19.25 billion in the second half of last year.
Drop
The number of deals in the first half of this year was up by 73 per cent from 132 in the same period last year to 229. Last month Ernst & Young Middle East reported M&A deal values in the Middle East and North Africa (Mena) region dropped by 59 per cent to $6.5 billion in the first quarter of 2010 compared to deals worth $15.8 billion in the same period last year. According to a recent survey of 27 investment banks by Zawya.com (M&A) activity the Gulf region is expected surpass $25 billion mark this year.
"The M&A sector now has an air of cautious optimism as key corporates' first quarter earnings show a return to double digit growth and chief executives are now seeking growth through acquisition strategies," said Jean Marc Paufique, Head of Professional Investment Division of Zawya.
Zephyr report shows that the largest Middle East deal by value in the first half of 2010 related to Kuwait Real Estate Company which involved a minority stake sale of about 5 per cent valued at $3.64 billion. The deal was one of the top 20 transactions involving investment in the property industry.
Apart from real estate, the sectors targeted by high-value deals included financial services, shipping and telecoms, as well as iron and steel production, petrochemicals and utilities. The banking industry was the most important sector by value with a total for the half-year of $7.98 billion.
The value of private equity investment in the Middle East plunged to a low not seen since before the recession. Just $135 million in private equity transactions was recorded in H1 2010 — a decline of 78 per cent from $617 million in second-half 2009 and 62 per cent from $355 million in first-half 2009.
There were just ten private equity deals targeting the Middle East and only three of these have known values. The largest was a $100 million investment in Iraqi cement manufacturer Al Rowad For Cement Production Company by France's Société de Promotion et de Participation pour la Coopération Economique and the International Finance Corporation.
Leverages
The UAE was targeted by private equity three times, while Saudi Arabia and Bahrain had two leveraged deals apiece.
Zephyr data shows global mergers and acquisitions activity reached the lowest half-yearly level since before the onset of the financial crisis in first-half 2010. The value of global deals declined by 17 per cent to $1.47 trillion from $1.78 trillion in the second half of 2009 as deal volume also fell by 17 per cent, to 30,034 transactions from 36,001 in the second half of 2009.
