Despite macro-economic challenges and a slowdown in the 2018 Middle East deal market, international interest in the region is seeing positive signs with some iconic deals already taking place in 2019. Despite the decline in the number of inbound deals from 74 in 2017 to 53 in 2018, international interest in the region continues to remain strong.
Governments have continued to make efforts with greater diplomacy to attract international inflows and also acquire interest in international strategic assets, PwC noted in its TransAct Middle East report.
The total volume of deals in the region fell from 267 in 2017 to 214 in 2018, led by a slowdown in the region’s largest markets. Overall M&A activity continues to remain slow in the current year, with 44 deals reported in Q1’19 (vs. 56 deals in Q1’18) and only 1 IPO reported in Q1’19 (vs. 4 IPOs in Q1’18).
“Given the macro economic challenges, deal activity has remained subdued but there are some interesting trends emerging which should be key to both buyers and sellers. We are also seeing a change in the M&A landscape as well as the priorities of the players who constitute this market,” Romil Radia Deals Markets Leader and Regional Valuations Leader, PwC
Consolidation continues to be a major driver of M&A activity in 2019 across the Mena region, especially in the banking and financial sector, where the region has seen a series of national and cross-border mergers, and also in retail and consumer goods, where online and traditional retailers continue to seek efficiencies to build scale. Private equity (PE) activity saw a decline from 26 percent to 21 percent of all deals in 2018.
Corporate dealmakers remain open to new strategic alliances and joint ventures, in line with the Middle East findings of our Global CEO survey. In total, corporate acquirers increased their share of deals from 54 percent in 2017 to 60 percent in 2018, with energy, financial services and healthcare among the most active sectors. Key drivers of corporate activity was the need for efficiencies, new technologies, and expansion of the value chain.
Going forward, Inbound and outbound activity will pick up, driven by the need across the Middle East to attract foreign investment and international expansion by Middle East companies, especially in fast-growing Asian markets. International investors are closely following the upcoming privatisation opportunities, particularly in the energy and infrastructure sector.
PwC expects some rebound in the level of GCC IPO activity since a number of companies have announced their plans to list in the next 12-18 months and some have already started preparatory work.
