Lumina predicts record year for mid-market deal activity

Overall market weakness boosted overall M&A deal volume as cash-rich conglomerates snapped up tech companies at repricing prices, a report said.

The Lumina Private Company Index (LPCI) Q2 2022 reflects significant repricing of deal valuations and cross-border opportunities.

While sovereign wealth funds are looking to capitalise on outbound opportunities in the UK and Europe, new areas such as metaspace are expected to emerge in the coming months.

The emergence of the second dimension

The emergence of secondary venture capital (VC) funds in the region is also a trend to watch, according to Lumina, a leading corporate financial advisory firm connecting capital and deals in the Middle East and the UK, in its latest quarterly report. The first private company M&A index to cover GCC, the index tracks private company M&A deal multiples across GCC’s broad spectrum, as well as publicly available information in the market.

In the second quarter, the average EBITDA/EV multiple fell to 6.2x, the index reported, reflecting a significant repricing of deal valuations due to a global slowdown, increased risks related to inflation and refinancing risks.

Against this backdrop, Lumina noted that future-oriented sub-sectors such as fintech, edtech and medtech performed the strongest.

The appearance of the Metaverse

New realms are also emerging, including the metaverse, which is expected to be a precursor to the future expansion of the metaspace. Lumina is currently advising on the region’s first transaction involving a leading global Metaverse creator.

High oil prices in the UK, a strong dollar and rising capital costs have led to strong investment commitments from the UAE and Saudi Arabia to the UK and Europe, mainly in biotechnology, clean energy development and sustainable infrastructure.

George Traub, Managing Partner at Lumina, commented: “While LPCI analyzes private deals across all sectors, we forecast a record year for mid-market deal activity in our key regions. We have seen many regional sovereign wealth funds leverage Overseas opportunities into the UK and Europe.”

He continued: “We also see the emergence of secondary VC funds as an ongoing trend to watch, looking to capitalize on those looking for liquidity and a significant repricing of valuations. Rising inflation and higher cost of capital, coupled with valuations Uncertainty of value, leading to a less risky investment structure and a return to a more structured exit.”- arab trade news agency