The mergers & acquisitions (M&A) deal values in the Mena region have doubled in the first quarter to hit $14.6 billion compared to $7.3 billion the previous year, with the UAE and Qatar accounting for 76 per cent of total disclosed domestic deal value, said a report by Ernst and Young (E&Y).
However, there was a three per cent drop in the number of deals announced in the first quarter which fell to 98 from 101last year, according to E&Y’s Mena mergers & acquisitions update.
The UAE and Qatar accounted for 76 per cent of the total disclosed domestic deal value in the region, said the report.
The UAE topped the region in terms of total value of disclosed domestic deals, comprising approximately 54 per cent (worth $2.2 billion); followed by Qatar also at 21 per cent (worth $880.4 million).
In the domestic space, the UAE also led the number of announced acquisitions with 11 deals. Saudi Arabia, Qatar and Kuwait followed with seven acquisitions each, it added.
“This increase can be attributed to growing investor confidence, improvement in the access to credit, relatively better convergence in pricing between investors and sellers and a hint of improved macro economic conditions,” remarked Phil Gandier, the Mena head of Transaction Advisory Services at E&Y Mena.
"This is especially true of the markets and the sectors that saw the most deal activity – a trend that we expect to continue," he stated.
The top 10 deals during the period were valued at $12.1 billion which represented 83 per cent of the total disclosed Mena M&A deal value. Of these, five are outbound (regional business buying international assets), three are domestic (regional business buying regional assets) and two are inbound (international business buying regional assets).
The top deal by value was worth $6.4 billion, involving the acquisition of Orascom Telecom Holding in Egypt by Baskindale Limited in Cyprus followed by the merger of UAE based Sorouh Real Estate and Aldar Properties for $2 billion.
These two deals comprised 69 per cent of the top ten disclosed Mena M&A deals by value, said the E&Y report.
According to the report, the inbound disclosed deal value increased from a negligible $0.4 billion last year to $7.2 billion in 2013, much of which can be attributed to the announcement of Baskindale’s acquisition of Orascom Telecom in Egypt for $6.4 billion.
The domestic disclosed deal value grew significantly by 171 per cent compared to last year, largely on account of the merger of Aldar Properties and Sorouh Real Estate valued at $2 billion; while the outbound disclosed deal value showed a decrease of 39 per cent, the it added.
Banking & capital markets and telecom sectors lead announced deal activity, said the E&Y update on the merger and acquisition activity in Mena.
The attractive sectors in the region were banking & capital markets, and professional firms & services which led deal activity with eight deals each, followed by oil & gas with seven deals, consumer products with six deals and real estate and telecom with four deals each. The sector with the largest disclosed deal value was telecom, representing $7 billion, said the report.
For outbound announced deal activity, attractive sectors were telecommunications with five deals followed by real estate with four deals.
SWF/PE in the region
In the private equity space, 20 SWF/PE deals were announced in this quarter, out of 98 announced deals in Q1 2013 (20 per cent of all announced deals). The 20 SWF/PE deals comprised US$1.6b of total disclosed deal value in 2013, with 40 per cent of deals outbound, the report said.
“The coming months are likely to mirror how the rest of the year will stack up in terms of deal activity. There is increasing optimism globally with key deal drivers like corporate earnings, economic growth, and the quality and quantity of acquisition opportunities. This could bode well for outbound deals," remarked Gandier.
"However, according to our Capital Confidence Barometer that tracks market sentiments, the level of optimism is Mena is lower due partly to continued tensions in some regional countries. Although this could have a dampening effect on deal activity, we are starting to see regional investors factor these risks in, ring fence them, and complete transactions," he added.-TradeArabia News Service