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Middle East first quarter M&A deals decline as value remains stable

Saudi Aramco’s 50 per cent acquisition of Petronas’ RAPID largest deal of Q1 2017

Gulf News

Dubai: Mergers & Acquisitions (M&A) activity in the Middle East and North Africa region declined in terms of number of deals during the first quarter of 2017 with 84 deals compared to 115 deals in the same quarter last year, according to EY’s Q1 2017 M&A report.

Despite the slowdown in the number of deals, the report showed overall deal values remained broadly stable reaching $18.2 billion (Dh66.85 billion) in the first quarter of 2017, compared to $18.4 billion in the same quarter last year.

The outbound announced deal value from the region increased substantially by 636 per cent from $1.3 billion the first quarter of 2016 to $9.3 billion in the same period this year. The announced inbound deal value also rose significantly from $0.5 billion in the first quarter of 2016 to $5.7 billion this year.

Domestic transactions took a decline of 81 per cent in value terms during the first three months of this year compared with the same period last year. Within the MENA region, the overall top ten deals contributed over 90 per cent to the total deal value registered in the period.

Looking ahead industry professionals are optimistic on the region’s M&A outlook both in terms of number of deals and values.

“As oil prices continue to stabilise, and government initiatives foster greater economic certainty, MENA executives are feeling more optimistic that the economic conditions are right to return to deal-making. Consequently the M&A pipeline has never been better — both quality and quantity. Furthermore, we expect the recent reversal of certain austerity measures in the GCC to result in more confidence in deal-making,” said Phil Gandier, MENA Transaction Advisory Services Leader, EY.

Saudi Aramco’s acquisition of a 50 per cent stake in Malaysian state-owned energy company Petronas’ RAPID project for $7 billion was the largest deal of the quarter. The biggest technology deal of the quarter was the acquisition of by Amazon for approximately $650 million. Amazon’s acquisition of Souq marks the company’s first move into serving the Middle East region.


Strong outlook

According to the latest EY Capital Confidence Barometer (CCB), executives from the region are feeling more positive about the global economy, with 47 per cent expecting deal activity to increase in the next 12 months with 41 per cent indicating they have five or more deals in the pipeline and 54 per cent of MENA companies looking to close deals over the next year.

A potential slowdown in global trade flows and an increase in protectionism, high fluctuation in currencies and capital markets, and increasing geopolitical uncertainty as significant economic risks. Market fluctuation and lower oil prices have 54 per cent of MENA executives looking at organic opportunities first to meet growth objectives.

“MENA executives consider growing market share as the main strategic driver for pursuing an acquisition. 24 per cent of the CCB respondents place the greatest attention and resources on organic growth as one of the largest capital management issues,” said Anil Menon, MENA M&A and Equity Capital Markets Leader.