21/10/2014 13:57 AST
Despite pausing in the past 3rd quarter, the MENA M&A market prolonged, during the first nine months of the year 2014 (9m14), its recovery path initiated post-financial crisis and in the aftermath of the Arab Spring, according to a recent report from Bureau van Dijk and MENA Research Partners.
The strengthening economic fundamentals, the amelioration in the risk profile of major regional countries, the governmental implementation of key business-friendly reforms are all stimulating factors for deal generation activity.
While the total number of completed deals has been stabilizing at the low-end of its range since 2009, the announced value of M&As reached $40 billion and $32 billion respectively during 9m13 and 9m14, compared to a slightly lower nine month average of $27 billion during the previous three years. Such trend is gradually reinstating the large deal sizes witnessed during the pre-2008 years.
From a geographic perspective, deal activity remains driven by a strong performance in GCC coupled with an ongoing pick-up in selected Arab Spring countries like Egypt and Morocco. GCC accounted for 44 per cent and 43 per cent respectively of the announced value and the volume of completed deals during 9m2014. This is, however, compared to 79 per cent and 42 per cent respectively during 9m2013, in an indication of larger deals being closed outside the Arabian Gulf countries.
Lisa Wright, Zephyr director said: “Despite some good performances by individual countries in Q3 the MENA region’s results were disappointing, particularly when compared to global values, which increased on Q2 although volume declined. In all there were 21,531 deals worth an aggregate $995,017 million completed worldwide in Q3 2014, compared to 22,427 worth $974,075 million in Q2.”
Cyclical sectors continued to be a major focus for the acquirers. During 9m2014, sectors like banks, construction and service companies accounted for a substantial share of the regional completed M&As, prolonging the previous years’ trend.
Minority acquisitions accounted for most of the number of the regional deals during the 9m2014, widening their lead over the past years relative to majority deals. This is in line with the general perception that regional investors are less reluctant to give up control of their business.
Foreign acquirers have been one major component in the MENA M&A market. During 9m14, they have accounted for 51 per cent of the number of completed deals, compared to 42 per cent during 9m2013. These number are however lower than thenine month average of 62 per cent witnessed during the period 2009-2012. This reflects a growing confidence in a number of regional economies and, in return, offers interesting exit options for local investors.
CPI Financial
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