Business

Mergers and acquisitions in the region forecast to shrug off oil slump

The deals in Mena this year will be led by outbound transactions in the Arabian Gulf, mainly in the UAE, Saudi Arabia, Qatar and Egypt, in line with last year’s trend.

Dania Saadi

February 09, 2015

Mergers and acquisitions (M&A) in the Middle East and North Africa will continue at a healthy rate this year despite the drop in oil price and weaker growth forecast in the region’s oil exporters, the advisory services firm EY said yesterday.

“The growth of Mena M&A is expected to continue in 2015 at a normalised year on year growth rate of up to 10 per cent,” said Phil Gandier, the Mena head of transaction advisory services at EY.

“The majority of Mena M&A transactions tend to occur in consumption-led sectors such as food and beverage, retail, health care and education, which have little correlation to economic activity and changes in oil price, so the positive trend is expected to continue.”

The deals in Mena this year will be led by outbound transactions from the Arabian Gulf, mainly the UAE, Saudi Arabia and Qatar, in line with last year’s trend.

“We expect to see outbound M&A deals continue to lead the market into 2015,” said Anil Menon, Mena M&A and IPO leader at EY. “With the exception of 2013, which saw domestic deal value exceed outbound deal value. Outbound deals have historically been the most popular option for Mena investors.

“We expect investors to continue looking outside the region for investment, particularly in sectors such as real estate and oil and gas.”

The value of announced deals in 2014 dropped 11 per cent to US$44.9 billion from $50.7bn in 2013 because of larger transactions in 2013, Mr Gandier said.

Among the deals in Egypt last year was the acquisition of biscuit producer Bisco Misr in December by Kellogg. In the UAE, a stake in the schools operator Gems Group was sold to Blackstone Group and Dubai-based Fajr Capital in October.

The UAE led the market last year, but Egypt is expected to outperform as international investors return to the North African country which was plunged into economic and political turmoil in 2011.

“Egypt also came back into the deal market with a vengeance in 2014 with many multinationals investing in Egypt,” said Mr Menon.

“The return of investments into Egypt signals that international companies are willing to bet on the long-term future of Egypt as they see stability improving. Saudi Arabia will see a number of local family businesses looking to reconfigure their investments to focus more on their core businesses.”

dalsaadi@thenational.ae

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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

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Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

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