Dubai: Mergers & acquisitions (M&A) deals across the GCC countries are expected to pick up pace in 2019 as companies across key sectors are seeking cost savings, synergies and efficiencies to compensate for the slowing economic growth across the region.
During the first quarter of 2019, the number of closed M&A transactions in the GCC increased by 39 per cent compared to the first quarter of 2018, according to data from S&P Capital IQ and GCC stock exchanges analysed by Kuwait Financial Centre (Markaz).
The UAE and Kuwait had the highest number of closed transactions among their GCC counterparts in the first quarter of 2019.
Data showed the UAE, Kuwait and Saudi Arabia together accounted for 96 per cent of the closed transactions in the first quarter of 2019. “The UAE and Kuwait had the highest number of closed transactions among their GCC counterparts in the first quarter of 2019. They collectively accounted for 70 per cent the transactions,” said Abdul Razzaq Razooqi, AVP Investment Banking at Markaz.
Data shows M&A deals in the region are largely driven by GCC-based acquirers. For the first quarter of 2019, more than 60 per cent of the closed transactions were driven by GCC acquirers.
Slowing growth
Analysts and economists said the relatively slow economic growth across the region is driving businesses to look for cost savings, synergies expansion and exit opportunities to boos profitability.
The last World Economic Outlook (WEO) report of the International Monetary Fund (IMF) projects lower real GDP growth for oil exporters from the region, with a downward revision from 0.6 per cent last year to 0.4 per cent in 2019. In the GCC, Saudi Arabia’s GDP growth is projected to slow from 2.2 per cent in 2018 to 1.8 per cent in 2019 and 2.1 per cent in 2010.
The IMF has revised the UAE’s economic growth outlook downwards from the October 2018 forecasts. According to the latest estimates, the UAE economy grew by 1.7 per cent against the October forecast of 2.9 per cent in 2018. For 2019, the IMF’s WEO has projected 2.8 per cent real GDP growth compared to the earlier forecast of 3.6 per cent.
In 2018, M&A deal value in Mena jumped 68.7 per cent to $26.76 billion, compared with $15.86 billion in 2017. According to a recent Mergermarket report foreign investment in the region has seen a noticeable uptick with a total of 22 inbound deals worth $14 billion were registered in the first quarter of 2019, following deals such as Uber’s acquisition of rival Careem Networks. Domestic consolidation was also on the rise with a 21 domestic deals- up from 14 in the fourth quarter of 2018.
With growing appetite for M&A deals across the region, the first quarter of 2019 witnessed a 70 per cent increase in the number of completed transactions by foreign buyers compared to the first quarter of 2018. In comparison to the fourth quarter of 2018, the number of such transactions grew by 89 per cent.
According to Markaz data, UAE targets represented 71 per cent of the closed transactions by foreign acquirers during the first quarter of 2019, while Saudi Arabia and Kuwait represented 23 per cent and 6 per cent respectively of the transactions during the same period. Bahraini, Omani and Qatari targets did not attract any foreign buyers during the first quarter of 2019.
There was a total of 14 announced transactions in the pipeline during the first quarter of 2019, representing a 27 per cent increase in the number of announced transactions compared to the fourth quarter of 2018. UAE and Saudi Arabia collectively accounted for 79 per cent of the announced transactions during the first quarter of 2019. Oman and Qatar made up 21 per cent of the announced transactions.
