The UAE, Saudi Arabia and Egypt accounted for 89% of the 632 M&A deals in the Middle East last year, according to a report.
According to a report by PwC Middle East titled “Gulf Exceptionalism Creates M&A Opportunities Despite Global Headwinds”, M&A activity in the region shows a notable exception to the general pattern of slowing global M&A deal activity.
It managed to maintain an impressive upward trajectory in 2022, with a series of deals worth over $1 billion in various industries. This is due to “Gulf exceptionalism”, which is due to favorable regional dynamics, such as higher oil prices and greater fiscal discipline, which contribute to greater economic flexibility and relatively higher growth in the region.
Highlighting key M&A trends through 2023 and what companies can do to pursue transformational deals, the report states that the Middle East is a rare global sweet spot for M&A for companies with the right strategic and financial resources to pursue transformational deals .
The UAE and Saudi Arabia saw the fastest year-over-year growth in deal volume, with deal volume up 9% and 6%, respectively. In the UAE, deal activity has focused on consumer markets, technology, industrials and financial services, supporting the country’s efforts to diversify away from oil and gas.
The technology, energy, food processing, healthcare and education sectors were the main drivers of IPO transactions in the region.
Fundraising continues to drive capital flows in 2022, and the region remains an attractive target for venture capital (VC) funds. Some of the key emerging M&A themes for 2022 include:
- Deep resources available to support M&A investments
- A higher interest rate environment should spur a greater focus on value creation
- High focus on technology and infrastructure
- Cross-border mergers and acquisitions continue to create national and regional champions
- The energy transition is creating new M&A opportunities
Romil Radia, deal markets leader for PwC Middle East, said: “The Middle East is certainly not immune to the economic headwinds affecting M&A elsewhere, but the mood here is more positive than in most global markets at the start of 2023 and comes from the Middle East. Some of the momentum last year continued into 2023. Advantageously, the region has deep financial resources available for transactions, supporting outbound and cross-border transactions. There is also huge potential for the energy transition, with transition programs continuing regionally, There will be a focus on technology and digital acquisitions.”
According to the report, current market conditions in early 2023 suggest that the Middle East will remain a major growth center for M&A, provided companies have a cohesive strategy and the right financial resources to pursue transformational deals.
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