Fewer fees for Mena’s investment bankers in first half of 2020

Decline in merger deals and equity market activity, although fundraising from governments gave bond markets a fillip

Dubai, United Arab Emirates
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Fees earned by investment bankers in the Middle East and North Africa region dropped 25 per cent in the first half of the year as fewer merger deals were completed, according to financial data company Refinitiv.

The value of mergers and acquisitions with any Mena involvement fell 55 per cent year-on-year to $50.7 billion (Dh186bn) in the first six months, although last year’s numbers were boosted by Saudi Aramco’s $69.1bn deal for the Public Investment Fund’s 70 per cent stake of chemicals giant Saudi Basic Industries.

In volume terms, “the number of deals declined 9 per cent from last year to a three-year low”, Refinitiv said in its Mena Investment Banking report. It did not give a reason for the decline.

Despite the fall, “the value recorded during the first half of 2020 is the third-highest first half total of all time after 2019 ($112.7bn) and 2007 ($58.5bn)”, it added.

Although activity slowed during the pandemic, "M&A activity gained momentum by the end of June on the back of the $15.6bn NCB-Samba Financial Group merger in Saudi Arabia, followed by an investment of $10.1bn by a consortium of investors into Adnoc's gas pipeline assets in the UAE," Ullas Rao, assistant professor of finance at Heriot-Watt University Dubai, told The National.

“Interestingly, June recorded the second-highest monthly total value of M&A since 1980.”

Saudi Arabia attracted the most amount of capital through in-bound deals, with the UAE second, securing 25 per cent of inbound M&A.

“Despite challenging economic headwinds engulfing the first half on the back of lower oil prices and the Covid-19 crisis, the region has continued to attract sizeable foreign investment,” Mr Rao added.

Fundraising on the region’s equity markets was slower, declining by 58 per cent in value terms to $875.7 million – $700m of this was raised through the IPO of Saudi hospitals operator Dr Sulaiman Al Habib Medical Group on the country’s Tadawul stock exchange in March. As a result, underwriting fees for Mena equity markets issuance fell 62 per cent to $17.1m.

Debt capital markets proved a bright spot as governments looking to provide fiscal and monetary stimulus measures to lessen the economic impact of the coronavirus tapped investors for cash.

Debt issuance in the Mena region hit a record first-half high of $69.5bn during the period, up 26 per cent year-on-year.

The UAE and Saudi Arabia were the most active issuer nations, raising $23.3bn and $19.1bn, respectively. Underwriting fees for debt issuance increased 6 per cent year-on-year to $161m, which is the highest first half total since records began in 2000.

Mena investment banking fees by volume and deal type, 2000-2020. Source: Refinitiv

The total value of investment banking fees earned in the Mena region in the first half stood at $522m, Refinitiv said. Morgan Stanley was the most active advisor in terms of M&A deals, with a 51 per cent market share.

Rival data provider Mergermarket said in its half-year review earlier this month that M&A deals in the wider Middle East and Africa region dropped 50 per cent in both volume and value terms.