As Economic Headwinds Grow, M&As Surge Across The MENA Region- Valutrics

The Middle East and North Africa (MENA) saw a record number of mergers and acquisitions (MAs) in the second half of 2016, according to a report.

During the six-month period, deals worth a total of $30.5 billion were struck, the highest volume over a six-month period since 2013, found AT Kearney’s 2017 MENA MA report.

Mega deals drove the uptick in activity with four transactions above $1 billion, totaling $24.2 billion, the report said.

The largest deal was in financial services—the merger of First Gulf Bank and National Bank of Abu Dhabi worth $14.8 billion. The deal created UAE’s largest bank with assets of around $178 billion.

The remaining big deals involved companies in shipping, oil and gas sectors.

The opportunity to acquire assets with attractive valuation enabling access to the region’s long-term growth potential is compelling for international corporate investors, the report said.

Deal activity surged in the second half of 2016 with corporations enhancing their participation in the overall MENA MA market, the report said.

Investors have also been using active portfolio management to maximize the value of their investments, though at a slower pace compared with the previous four periods, the report noted.

Divestments abroad fell 38% in the second half of 2016 compared with the first half of the year, reaching ten transactions. Divestment value dropped 63% to $1 billion in transactions.

MA activity is expected to remain dynamic this year as market players continue initiatives to enhance competitiveness, the report said.

Investors are expected to focus on transactions with scale and impact, it added.

According to an earlier report by Grant Thornton, sectors such as food and beverage, healthcare, hospitality, education and oil, and gas have traditionally led MA activity in the region.

However, investors tend to shy away from cyclical investments such as contracting companies and real estate developers.

Also, while debt-raising on asset-backed deals can be closed with relative ease, equity fundraising remain even more difficult.