Dubai: , The value of announced deals with disclosed value in the Middle East and North Africa (MENA) region increased by 220.8 per cent to $115.5b in the first half of 2019, up from $35 billion in H1 2018, according to the EY H1 MENA M&A report.
Deal volume witnessed a decrease of 10.7 per cent, with 216 announced deals in H1 2019, down from 242 deals recorded in H1 2018.
The largest deal during H1 2019 was Saudi Aramco agreeing to acquire a 70 per cent stake in SABIC worth US$69.1bn from Public Investment Fund (PIF).
Mena executives are relatively more optimistic about the improving economic prospects while still keeping an eye on evolving geopolitical risks.
In H1 2019, state-owned entities were involved in 55 deals (25 per cent of total deals) amounting to $104.5bn, 90 per cent of the total deal value, including mega deals involving Saudi Aramco, ADNOC and ADIA.
“MENA corporates are finding innovative ways to raise capital and have stepped up the frequency of their portfolio reviews. The EY Capital Confidence Barometer (CCB) report indicates that 61 per cent of MENA executives say their companies are reviewing their portfolios every quarter or more frequently – more often than global executives. With more frequent portfolio reviews, several non-core businesses are set aside for divestment thereby fueling deal activity,” said Matthew Benson, MENA Transaction Advisory Services Leader, EY.
In H1 2019, the chemicals sector had the highest deal value with U$69.3bn due to the landmark Saudi Aramco – SABIC deal, followed by the oil and gas sector with $14.2bn. The provider care sector recorded $10.3b, the banking and capital markets sector recorded $5.1bn in deal value, followed by the technology sector, which logged a deal value of $4.3bn, which included Uber’s $3.1bn acquisition of Careem Networks.
“MENA executives are relatively more optimistic about the improving economic prospects while still keeping an eye on evolving geopolitical risks. The EY CCB report found that MENA executives are proactively pursuing strategic options to strengthen competitive advantage and accelerate growth in an era where technology continues to disrupt traditional business models,” said Anil Menon, MENA M&A and Equity Capital Markets Leader, EY
H1 2019 saw an increase in domestic M&A activity in terms of deal value, with 111 deals amounting to $79.3bn, compared with 96 deals amounting to $5.5bn in H1 2018. Two mega strategic deals, as part of sector consolidation, drove the domestic activity by value – a chemicals sector deal in Saudi Arabia, worth $69.1b and a deal in the banking and capital markets sector in the UAE, worth $4bn.
In addition, MENA witnessed 65 outbound M&A deals amounting to $21bn compared with 77 deals amounting to $18.2bn in H1 2018. Strategic investments by sovereign wealth funds and state-owned enterprises, including mega deals by ADIA and Saudi Aramco, drove the MENA outbound activity.
A key highlight of H1 2019 was Uber’s acquisition of Careem Networks for $3.1bn, the largest technology sector transaction to date in the Middle East, as home-grown technology start-ups find themselves being pursued by global players.
UAE records the highest inbound investment
The first half of 2019 witnessed a fall in inbound M&A deal volume in the MENA region, with 40 deals amounting to $15.1bn compared with 69 deals recorded at a value of $12.3bn in H1 2018. The UAE was ranked the highest in terms of inbound M&A investment in the region, with 20 deals amounting to $14.4bn.
The oil and gas sector was the top target sector for inbound activity, accounting for $10.8bn. Four out of the six inbound deals in the sector were in the UAE, including three mega deals, involving the ADNOC stake sale in its oil refining and pipeline business.