The UAE and Saudi Arabia dominated the top 10 merger and acquisition deals in the Middle East and Africa last year, driven by energy and banking transactions. More than half of the 10 biggest deals completed in the region in 2020 were in the Arab world's two biggest markets, Mergermarket data shows.
The value and volume of M&A deals in the region dropped in the past 12 months compared with a blockbuster 2019, according to the financial data provider.
The Middle East and Africa recorded 346 M&A transactions last year, a decrease of 30 per cent from 495 deals counted in 2019.
The value of deals in 2020 reached $96.9 billion, the region's second-highest value on record, but down by nearly a third from $143.8bn in 2019.
Globally, the amount of fees investment banks earned for advising on M&A dropped 4 per cent to $31.2bn last year, the weakest annual period since 2016, according to data published last week by Refinitiv.
Looking ahead to 2021, however, merger activity around the world is expected to pick up again, including in mature industries, Pictet Asset Management said in a report titled Outlook 2021 Perspectives: Investment themes for the year ahead.
"The extremely low cost of funding and brightening economic outlook are major incentives for M&A," Pictet said. "As companies and whole sectors respond to a fast-changing corporate and economic landscape, deal activity can be either offensive [takeovers by companies that want to expand their operations or gain new skills and resources to build market share in growing sectors] or defensive [mergers in mature industries like European banking]."
M&A values in the Middle East and Africa during the third quarter of 2020 totalled $7.1bn, and was the lowest quarterly value since 2015, Mergermarket data showed. Some 75 deals were completed in the region during that period, which was the lowest quarterly total in a decade.
Cross-border M&A in the region suffered during 2020 as travel restrictions hampered deal-making logistics, it said. Foreign investment into the region fell to $28.9bn across 159 deals, its lowest annual value since 2015 and lowest volume since 2012. Intra-regional deals accounted for the majority of activity, reaching $68bn across 187 deals last year. This represented the second-highest annual value on record, only behind 2019.
The energy, mining and utilities sector were the most active industries for M&A activity by deal value in 2020, with 43 deals worth $38.9bn.
The most valuable deal was Abu Dhabi National Energy Company's merger with Abu Dhabi Power Corporation to create one of the largest utility companies in the Europe, Middle East and Africa region.
The second-most valuable deal was Saudi Arabia's biggest lender, National Commercial Bank, entering into a binding merger agreement with smaller lender Samba Financial Group.
In line with global trends, the technology sector in the region remained active throughout the year after the pandemic accelerated the need for companies to further digitise their business offerings. A total of 69 deals worth $6bn were conducted in the sector last year, which accounted for a 21 per cent share of the region’s deal count, up from 17.4 per cent in 2019.
The financial services sector also saw a noticeable uptick in activity, reaching $28.7bn across 39 deals, up to its highest annual value on record, the data showed.