Dubai: The UAE has emerged a clear regional leader in mergers & acquisition activity in the Middle East and North Africa (Mena) region with the country leading the region in M&A, both in terms of number of inbound deals and the value of deals, according to EY’s (Ernst & Young) Mena M&A update.

In the third quarter of this year, the UAE accounted for 48 per cent of the number of inbound deals with the total value of inbound deals accounting for $4.26 billion (Dh15.6 billion) or 93 per cent of the inbound deals into the region.

For the Mena region as whole deal activity increased by 17 per cent in the third quarter of 2014, where 109 deals were announced compared with 93 deals in the third quarter of 2013. However the announced deal value in Mena decreased by 47 per cent from $17.5 billion in the third quarter of 2013 to $9.3 billion in the third quarter of 2014, indicating a preference for smaller strategic deals.

Both domestic and outbound deal value decreased by 70 per cent and 59 per cent respectively, while inbound deal value rose by 16 per cent in the third quarter of 2014 compared to the same quarter last year. However, domestic deal activity saw an increase of 59 per cent, while inbound and outbound deal activity dropped compared to the third quarter of 2013.

“Contrary to global trends, bolt-on acquisitions may not make up the larger portion of revenue growth in the Mena region. Although this year has seen an increase in confidence and deal-making, executives are more cautious in their approach,” said Phil Gandier, Mena Head of Transaction Advisory Services, EY.

In the private equity space, 20 sovereign wealth fund/private equity deals were announced in the third quarter of 2014, with September 2014 having the most activity of nine deals followed by July and August with six and five deals respectively.

The decrease in both domestic and outbound deal values in the third quarter of this year indicates that Mena executives are prioritising organic growth, even as bolt-on acquisitions remain in their plans. “Businesses are not planning acquisitions at the expense of organic growth, but they expect to do deals that are aligned to their strategy,” said Gandier.

Consumption sector leads

Consumer products, asset management and real estate were the leading sectors in terms of domestic deals in the third quarter of 2014. International investors looked to oil and gas, diversified industrial products and consumer products sectors for investment opportunities within Mena. For outbound deals, oil and gas, diversified industrial products, real estate and provider care sectors dominated third quarter deal activity.

“Deal activity has increased in consumption-led sectors such as real estate and construction, consumer products and diversified industrials. Looking ahead, mid-market deals in consumption-led sectors will continue to dominate the M&A landscape in the GCC in the future,” said Anil Menon, MENA M&A Leader at EY.