Mena merger deal values soar to $51bn in 2013
Dubai, February 19, 2014
The mergers & acquisitions (M&A) deal values in the Mena region grew 13 per cent in 2013 to hit $50.7 billion when compared to $44.8 billion the previous year, with the UAE and Qatar leading the regional deal activity, said a report by Ernst and Young (E&Y).
The year also witnessed an increase in the number of deals which rose to 442, up 11 per cent from 398 deals in 2012.
The E&Y in its Mena IPO update said while the announced deal volumes increased by 11 per cent from 107 deals in the fourth quarter of 2012 to 119 deals last year, the deal values plunged 40 per cent to $8 billion from $13.3 billion.
In comparison to the previous quarter, the announced deal values decreased from $17.5 billion in the third quarter of 2013 to $8 billion last quarter, whereas the announced deal activity rose 28 per cent from 93 deals in the third quarter of 2013 to 119 deals in fourth quarter.
The fourth quarter witnessed higher deal activity, yet lower deal value compared to the same period in 2012, said a senior official.
"Overall, 2013 was a better year for the M&A market. However, the fourth quarter fell short in terms of deal value compared to the year before," remarked Phil Gandier, Mena head of Transaction Advisory Services, EY.
"We expect performance to continue to improve into 2014 due to the alignment of core fundamentals such as positive economic sentiment, enhanced credit availability, the imperative for growth and the expectation to create jobs,” he added.
Of the top 10 announced deals by value in Mena region in 2013, five of the deals were acquired by UAE companies and two of the deals were acquired by Qatari companies, stated the E&Y report.
The largest M&A deal in 2013 was the merger of Dubai Aluminum with Emirates Aluminium for $7.5 billion, followed by the acquisition of Itissalat Al Maghrib SA (Maroc Telecom) in Morocco by Emirates Telecommunications Corporation in the UAE for $6.1 billion.
The trend of telecommunication deals representing mega deal values continued in 2013 with Qatar Foundation buying a 5 per cent stake in Bharti Airtel for $1.3 billion, the report added.
According to EY’s latest Mena Capital Confidence Barometer (CCB), which measures corporate confidence and boardroom trends at a Mena level, 75 per cent of respondents expect local deal volumes to improve and 51 per cent consider growth their primary focus.
"The highest percentage of confidence in the local economy is shown for indicators such as economic growth (70 per cent) and credit availability (59 per cent). In addition to growing confidence, 87 per cent of executives now consider credit either stable or improving – the highest levels in the last two years," stated Gandier.
The sectors most likely to make an acquisition in the next 12 months are consumer products, real estate, automotive, diversified industrial products and financial services. 75 per cent of Mena CCB respondents stated that they would use cash to fund their future acquisitions, which indicates high levels of liquidity with corporates and family businesses, said the E&Y report.
In terms of value, domestic deal values rose to $22.5 billion, followed closely by outbound deals with announced deal values of about $18.5 billion, 37 per cent of total announced deal value in 2013. In terms of volume, domestic transactions outnumbered inbound and outbound deal activity, comprising 49 per cent of total deals in 2013.
Total inbound announced deal value was $9.7 billion, slightly short of $9.9 billion of announced inbound deal value in 2012. The target sector focus of inbound deals in 2013 was oil and gas, representing 39 per cent of total inbound deal value. In terms of volume, the oil and gas sector led as the target sector of inbound deals, with 18 deals, representing 18 per cent of total inbound deals, the report added.
Anil Menon, Mena head of M&A Advisory Services, EY, said: “Mena has historically been a net exporter of capital. 2013 was different in the sense that much of the acquisition capital was allocated within Mena.”
"Of the 442 deals announced in the region in 2013, sovereign wealth funds (SWF) were involved in 19 deals with announced deal value of $14.5 billion – making SWFs the single largest buyer constituency in Mena contributing 29 per cent of total deal value in 2013," said Menon.
"In addition to the Investment Corporation of Dubai and Mubadala’s decision to merge the businesses of Dubai Aluminum and Emirates Aluminum; Mubadala was also involved in a consortium with other investors for the acquisition of IMG Worldwide, valued at $2.3 billion," he added.-TradeArabia News Service