Mena merger deals plunge 66pc in Q1
Manama, May 21, 2009
Mergers and acquisitions (M&A) deals in the in the Middle East and North Africa (Mena) region went down by 66 per cent in the first quarter of this year compared to the same period last year.
This was revealed in Ernst & Young's quarterly Middle East update on mergers and acquisitions, which compiles publicly available deals and values across the region.
The update revealed that M&A activity had fallen both in terms of number of deals and disclosed values.
A total of 140 deals were announced in the first quarter of last year against 47 in the first quarter of this year.
'The drop in the number and value of deals in the Middle East is reflective of the global economic recession and follows the trend in world-wide M&A activity,' said Ernst & Young Middle East head of mergers and acquisitions Azhar Zafar.
'Deals within the Mena region have fallen by 57 per cent. However, it is worth noting that inbound and outbound deals into and from Mena have fallen in excess of 70 per cent, showing that investors are looking inwards and are more cautious when it comes to cross-borders deals.
'The first quarter statistics also confirm our experience of the market place. Investors took more time or did not make decisions as they were unsure of how much bad news was yet to come.
'However, astute investors continued to acquire companies with good business models and sound cash flows at reduced valuations.'
The average deal size in the Mena region fell from $215 million in the first quarter last year to $116 million whilst average size of outbound deals has also fallen from $913 million to $880 million for the same periods.
In the period 27 deals disclosed value out of the total 47 announced.
The value of disclosed deals fell by almost 73 per cent - from $42.2 billion last time to $11.5 billion in the first quarter of this year.
Domestic deals saw a fall of 79 per cent in terms of value - from $8.8 billion to $1.9 billion. The value of outbound deals also dropped 78 per cent, from $30 billion to $9.7 billion.
Energy, oil and gas was the top sector for regional M&As in the first quarter of this year, with six deals while financial services and banking had five deals and telecoms had four.
Going forward, Azhar believes that M&A activity in the next several quarters will be dependent on the availability of liquidity in the marketplace and the willingness of sellers to accept realistic valuations.
'However if liquidity continues to remain tight, we could expect to see mergers especially as declining revenues and margins would force competitors to consolidate in order to reduce costs and continue operating profitably,' he added.-TradeArabia News Service