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The Mena region recorded 359 mergers and acquisitions (M&A) transactions worth $42.6 billion in the first six months of 2022, according to the Mena M&A Insights report published by professional services firm Ernst & Young.
The increase in M&A activity represented a 12% year-over-year increase in the number of deals, driven by continued post-pandemic economic growth across the region, driven by high oil prices and increased confidence in corporate boards.
During the six-month period, domestic deals accounted for 48% and 33% of M&A deal volume and value, respectively, according to the report. Although crude oil price volatility, economic uncertainty and global market disruption provided marginal boosts, deal activity was largely driven by private equity (PE) or sovereign wealth fund (SWF) participation.
In the first half of 2022, M&A activities involving PE and SWF accounted for 35% and 38% of the total deal volume and value, respectively. Among domestic PE or SWF deals, the United Arab Emirates (UAE) was the most favoured destination with 18 deals, while the Kingdom of Saudi Arabia (KSA) was the most active region for acquisitions with 27 deals.
The report also showed that deals involving government-related entities (GREs) totaled $16.9 billion in the first half of 2022, accounting for 40% of the total disclosed deal value. Interestingly, GRE-led deals have fallen from an average of 62% of value in previous years to 40% of value, indicating an increase in private sector participation in regional deals.
Brad Watson, EY MENA Strategy and Transactions Leader, said: “Despite uncertainty in the global economy, we continue to witness interest across the Middle East and North Africa as government-initiated economic diversification continues to fuel interest in strategic deals. Positive trajectory of regional M&A activity. Fiscal reforms aimed at strengthening cooperation between the public and private sectors, especially in the UAE and Saudi Arabia, are increasing investor interest, while comprehensive government-led initiatives are supporting the region’s booming start-ups ecosystem, thereby further increasing transaction activity.”
MENA Target Countries by Deal Value
The UAE ranks among the top five in the MENA region with 105 deals worth $14.2 billion. It was followed by Egypt with 65 deals worth $3.2 billion, Saudi Arabia with 39 deals worth $2.8 billion, Morocco with 18 deals worth $1.8 billion and Oman with 10 deals worth a total of 7 One hundred million U.S. dollars.
The top five target sub-sectors (by transaction value) for the MENA region as a whole include transportation, consumer goods, telecommunications, real estate, and power and utilities
Oil and gas operations in the Gulf Cooperation Council region continued to diversify amid volatile commodity prices and inflationary pressures. As a result, sectors such as transportation, consumer goods, telecommunications, real estate, and power and utilities continue to attract the majority of investment.
Anil Menon, EY’s MENA M&A and ECM Leader, said: “The most interesting development in the MENA M&A market in the first half of 2022 is the reduced reliance on GRE-led deals. The private sector leads the deal in MENA region , which reflects attractive fundamentals, ample liquidity and a re-rating of long-term growth companies.”
Domestic discount
Overall, 173 domestic deals worth $13.9 billion were completed in the first six months of 2022. The three deals accounted for about 41% of the domestic M&A value.
Ghitha Holding PJSC agreed to buy Tamween Management LLC for $2.4 billion; Q Holding to buy Reem Investments PJSC for $1.6 billion; Saudi Arabia’s Public Investment Fund to buy Kingdom Holding Company (16.8% stake) for $1.5 billion.
The top five domestic sub-sectors by deal value are: real estate ($3.3 billion), consumer goods ($2.9 billion), banking and capital markets ($2.4 billion), asset management ($1.5 billion) and other transportation ($2.4 billion) $800 million).
Inbound transaction
Rising energy prices, the implementation of pro-business reforms in the region and the easing of government travel restrictions led to an increase in inbound deals in the MENA region, with 94 deals worth $9.8 billion, compared to 62 a year earlier.
The UAE continued to be a favoured investment destination with 51 deals worth US$7.4 billion in the first half of 2022, supported by reforms aimed at strengthening its business environment, attracting foreign investment and incentivizing companies to set up or expand operations.
Egypt has also emerged as another major investment destination, with transaction activity rising by 6 million year-on-year in 2022, largely thanks to favorable government initiatives, including granting special licenses to foreign investors.
US leads inbound deal activity in MENA
U.S. entities are the most active investors in the MENA region in terms of deal volume, participating in 30% of inbound deal activity, with a particular focus on technology-related investments. The activity was largely driven by the $5 billion deal signed in June by Caisse de Depot et Placement du Quebec to acquire a 22% stake in Jebel Ali Free Zone, 22% in National Industries Park and 22% in Jebel Ali Port.
The top five sub-sectors by deal value are: other transportation ($5 billion), power and utilities ($1.7 billion), technology ($1.5 billion), chemicals ($600 million), and real estate ($400 million).
Overseas transactions
In the first six months of 2022, the region witnessed 92 outbound transactions totaling $19 billion, compared with 75 outbound transactions totaling $5.2 billion in 2021 from 6 million. The UAE had the highest number of outbound deals, led by technology and consumer goods, which accounted for 35% of the 54 outbound deals in the UAE.
The UAE also saw the largest outbound deal signed in May, when Etisalat Group plc bought a 9.8% stake in Britain’s Vodafone Group for $4.398 billion.
The top five overseas target sub-sectors by deal value are: telecommunications ($4.4 billion), media and entertainment ($3.5 billion), aviation ($2.2 billion), consumer goods ($1.3 billion), and power and utilities ($1.3 billion) Dollar). – arab trade news agency
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