Middle East mergers and acquisitions activity rises 59% in first half of 2021

The region recorded 307 deals worth $40.3bn despite pandemic-induced economic headwinds, Baker McKenzie says

The Cairo skyline. Egypt ranked as the most popular target country by value and the second by volume with 18 deals valued at $1.8bn in the first half of 2021. Reuters

The volume of mergers and acquisitions in the Middle East surged 59 per cent annually in the first half of this year as appetite for investment returned despite pandemic-related uncertainties, according to a new study.

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, law firm Baker McKenzie said in a report on Sunday.

The first-half value of deals dropped to $40.3 billion, a 7 per cent year-on-year decline. However, it was a significant improvement when compared to $13.2bn worth of deals recorded in the second half of 2020.

“Last year was probably the most turbulent year for the M&A market in the Middle East and across the globe in decades,” Omar Momany, partner and head of corporate M&A practice at Baker McKenzie Habib Al Mulla, said.

“Despite continuous pandemic uncertainties in 2021, the region has seen a steadily ascending level of M&A activity since the beginning of 2021 and is currently witnessing substantial growth in both values and volumes as deal makers' appetite return with a focus on capturing opportunistic deals.”

March recorded the highest number of deals with 75 transactions and April was the best month in terms of transaction values at $19.2bn across the region.

April’s high values were driven by transactions including Saudi Aramco’s $12.4bn deal to sell a 49 per cent stake in its pipelines to a consortium led by US-based EIG Global Energy Partners.

Egypt ranked as the most popular target country by value and the second by volume with 18 deals valued at $1.8bn.

“The high volumes and values by the beginning of 2021, and especially towards the mid of the first half of the year, demonstrate a strong comeback” Mr Momany said.

Accelerated Covid-19 mass inoculation programmes and a brighter economic outlook means the deal-making momentum is likely to continue in the second half of this year, according to the report.

The global economy has bounced back strongly from the pandemic, which severely disrupted economic momentum last year. The International Monetary Fund expects the world economy to expand 6 per cent in 2021, after contracting 3 per cent last year.

The majority of deals in the region during the first half of the year were cross-border, with companies looking at new opportunities or reviving deals that were shelved in early 2020 due to the pandemic uncertainties.

Despite continuous pandemic uncertainties in 2021, the region has seen a steadily ascending level of M&A activity since the beginning of 2021 and is currently witnessing substantial growth in both values and volumes

Omar Momany,
partner, Baker McKenzie Habib Al Mulla

Almost 200 cross-border M&A transactions worth $30.7bn in the first half of 2021 were higher both in volume and value – 43.2 per cent and 41.4 per cent, respectively, when compared to domestic deals during the same period last year.

First-half domestic deals doubled to 108 from 54 in the first six months of 2020.

However, value dropped by 56.2 per cent to $9.5bn over the same period.

Cross-regional deal volumes and values also soared, with 170 deals valued at $30.2bn in the first six months of 2021, up from 126 deals worth $22bn in first half of 2020.

Sectors that garnered investor interest include technology and venture capital space, with the Kitopi Series-C funding led by SoftBank, the Anghami SPAC merger and the Swvl SPAC transaction.

“We anticipate that, in the months to come, there will be a sustained increase in tech-focused regional and outbound M&A [with Indian tech and biotech investments from the region also being of particular interest] as investors continue to hunt opportunities in this fast growing sector,” Osama Audi, M&A, private equity and venture capital partner at the law firm, said.

The tech companies themselves will likely need to focus on growing revenue inorganically through acquisitions, he added.