The volume of mergers and acquisitions in the GCC increased 39 per cent annually in the first half of this year as investment appetite returned despite coronavirus-induced uncertainty.
However, M&A deals in the region dropped to $14 billion during the period, a 47 per cent yearly decline, according to the report compiled by the Boston Consulting Group in collaboration with Germany’s Paderborn University.
This annual analysis of the GCC’s M&A landscape is based on BCG’s M&A database of more than 4,500 deals from January 1990 to June 2021.
“Despite the ongoing crisis, the impact on M&A deals being made has proven to be temporary, with volume rallying substantially this year following an intense period of difficulty not long ago,” said Ronald Maalouf, BCG managing director and partner.
“The outcome for the region is attributed to a higher volume of transactions, as well as corporate decision makers, investors and deal brokers operating across the region. Their adaptability has collectively enabled the M&A segment to rebound favourably generally, although deal value must now follow the volume of deals in rebounding …”
Stock markets in the UAE and Saudi Arabia are experiencing a rush in initial public offerings as companies tap into markets for liquidity to fuel their post-pandemic growth. Some of the high-profile listings in the UAE include Adnoc Drilling, satellite operator Yahsat and Fertiglobe. Clean energy company Acwa Power and Saudi Tadawul Group were the two major listings in the kingdom in the past couple of months.
The volume of M&As in the Middle East surged 59 per cent annually in the first half of this year, according to a study by law firm Baker McKenzie in September. The region recorded 307 M&A transactions in the first six months of the year, 48 per cent higher than the number of deals completed in the second half of 2020, the law firm said.
The global economy has bounced back strongly from the pandemic, which severely disrupted economic momentum last year. The International Monetary Fund has projected that the world economy will expand 5.9 per cent in 2021, after contracting 3 per cent last year, and has kept its 2022 projection unchanged at 4.9 per cent.
Deal value in the UAE increased sharply alongside the volume of deals in the first eight months of 2021, recording a total of 100 deals amounting to $11bn, according to BCG.
This is mainly due to a rebound in large deals, with four such transactions valued at more than $1bn in total, contributing to a 433 per cent increase, compared with the first eight months of 2020, the report found.
Meanwhile, Saudi Arabia recorded a decrease in deal value in the first eight months of 2021, despite a 13 per cent increase in the volume of deals, BCG revealed.
The decrease in deal value is an indication of fewer large-scale transactions that the kingdom recorded in previous years, such as Saudi Aramco’s acquisition of Sabic in 2019 and the National Commercial Bank’s merger with Samba Financial Group in 2020, the report said.
In Qatar, deal value decreased in the first eight months of 2021, although the volume of deals grew by more than five times when compared with the same time last year.
“These examples illustrate that deal value in the GCC will follow a volume of rebounding from the pandemic,” said Ihab Khalil, managing director and partner of BCG.
“This will stem from several factors that continue unfolding across the region, such as increasingly favourable economic conditions, industrial and regional consolidations and widespread sustainability efforts. That being said, the coming period is one where value creation can also be attained in other areas, including on the back of divestitures.”