The number of mergers and acquisitions in the Middle East and North Africa rose 13 per cent on an annual basis last year to 754 transactions, with the UAE topping M&A activity in the region, according to EY.
The region's "unprecedented" M&A activity came on the back of improved market conditions from higher oil prices, investor-friendly reforms and governments easing Covid-related travel restrictions, the London-based consultancy said on Monday in its EY MENA M&A Insights 2022 report.
The UAE recorded three of the region’s largest M&A deals, led by Canadian fund Caisse de Depot et Placement du Quebec’s acquisition of a 22 per cent stake in three of DP World's Dubai-based assets for $5 billion.
The second-biggest was an outbound deal by Abu Dhabi-based telco e&, which acquired a 9.8 per cent stake in the UK's Vodafone Group for $4.4 billion in May.
Adnoc's acquisition of 24.9 per cent stake in OMV from Mubadala Investment Company for $4.1 billion rounded off the top three deals.
"After a resurgence in 2021, M&A activity in the Middle East reached new heights last year, testifying to the success of companies adjusting their M&A strategies to the needs of the changing market," said Brad Watson, EY Mena strategy and transactions leader.
"Continuing a strong run, domestic deals were a significant driver of deal volume in the region.
"Furthermore, the number of inbound deals in the UAE indicates that non-Mena investors are showing significant interest in the conducive business environment created by its visionary government.”
The UAE, the Arab world’s second-largest economy, and the wider GCC region has seen a flurry of M&A activity amid strong investor demand as economies rebound at a quicker pace from the coronavirus-induced slowdown and liquidity has been shored up by high oil prices.
The UAE dominated the lists of M&A target countries and bidder countries by value last year, followed by Saudi Arabia in both rankings, EY said.
In the kingdom, the Public Investment Fund’s proposed acquisition of a 51 per cent stake in STC's telecom towers company Tawal is in line with the country’s Vision 2030 that seeks to diversify its economy away from oil, the report said.
Meanwhile, Saudi Aramco's acquisition of US motor oil and lubricant maker Valvoline's global products business for $2.7 billion was a "strategic transaction in the oil and gas sector".
Egypt and Oman also climbed into the top five rankings of Mena target and bidder countries, the M&A report showed.
The US had the highest Mena deal number at 35 — of which 19 were in the technology sector.
Domestic deals made up slightly more than half of the total M&A deal volume in Mena at 388 transactions and 34 per cent of the value at $28.4 billion, the report showed.
Outbound deals led in value with $40.1 billion across a total number of 201 transactions, while 165 inbound deals amounted to $14 billion in total disclosed value.
The region recorded 137 deals involving government-related entities (GREs) last year, which was 78 per cent higher than 2021 and the highest number since 2017, according to EY.
GRE-involved deals accounted for 49 per cent of the total disclosed deal value at $40.3 billion.
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In terms of sectors, technology made up 25 per cent of the total deal volume in Mena, as the region seeks to become a hub for tech start-ups by further easing the conducting of business, reforming legislation and enabling investment.
"The macro-economic challenges in the US and Europe have triggered a retreat of capital to the Mena region with the GREs and regional strategics leading the pack," said Anil Menon, EY Mena head of M&A and equity capital markets.
"Large cap players are super active and hunting. The unprecedented volume of deal activity in 2022 is a clear reflection of an exceptionally buoyant deal environment, which we expect will continue in 2023."
Meanwhile, global M&A activity is off to a record slow start to the year, its slowest since 2010, according to a separate report by Goldman Sachs on Monday.
Year-to-date activity is down 65 per cent on the same period last year.
The slowdown comes amid continued macroeconomic uncertainty and the "prospect of increasing pressure on earnings" that has left companies "erring on the conservative side" and remaining in "defence mode", it said.