QATAR: Mergers and acquisitions in the Middle East and North Africa (Mena) have doubled year-on-year …with Qatar and the UAE accounting for 76% of the value

Mergers and acquisitions (M&As) in the Middle East and North Africa (Mena) have doubled year-on-year to $14.6bn in January-March this year with Qatar and the UAE accounting for 76% of the value, according to Ernst and Young (E&Y).

However, M&A volumes fell 3% to 98 deals in the first quarter (Q1) of 2013, E&Y said in a latest report.

“This increase (in deal value) can be attributed to growing investor confidence, improvement in the access to credit, relatively better convergence in pricing between investors and sellers and a hint of improved macro economic conditions. This is especially true of the markets and the sectors that saw the most deal activity – a trend that we expect to continue,” Phil Gandier, Mena Head of Transaction Advisory Services at E&Y said.

The UAE topped the region in terms of total value of disclosed domestic deals, comprising about 54% (worth $2.2bn); followed by Qatar at 21% ($880.4mn), it said.

In the domestic space, the UAE also led the number of announced acquisitions with 11 deals. Saudi Arabia, Qatar and Kuwait followed with seven acquisitions each, according to the report.

In Mena, the attractive sectors were banking and capital markets as well as professional firms and services, which led deal activity with eight deals each, followed by hydrocarbons with seven deals, consumer products with six deals and real estate and telecom with four deals each. The sector with the largest disclosed deal value was telecom, representing US$7bn.

The top 10 deals in Q1 2013 were valued at $12.1bn, which represented 83% of the total disclosed Mena M&A deal value. Of these, five are outbound (regional business buying international assets), three are domestic (regional business buying regional assets) and two are inbound (international business buying regional assets).

The top deal by value was worth $6.4bn, involving the acquisition of Orascom Telecom Holding in Egypt by Baskindale Limited in Cyprus, followed by the merger of UAE-based Sorouh Real Estate and Aldar Properties for $2bn. These two deals comprised 69% of the top ten disclosed Mena M&A deals by value.

The inbound disclosed deal value increased from a negligible $0.4bn in Q1 2012 to $7.2bn in Q1 2013, much of which can be attributed to the announcement of Baskindale’s acquisition of Orascom Telecom in Egypt for US$6.4bn.

The domestic disclosed deal value grew “significantly” by 171% in Q1 2013 compared with Q1 2012, largely on account of the merger of Aldar Properties and Sorouh Real Estate; while the outbound disclosed deal value showed a decrease of 39%.

In the private equity space, 20 sovereign wealth fund/private equity deals were announced in this quarter, out of 98 announced deals in Q1 2013 (20% of all announced deals). The 20 deals comprised $1.6bn of total disclosed deal value in 2013, with 40% of deals outbound.

“The coming months are likely to mirror how the rest of the year will stack up in terms of deal activity. There is increasing optimism globally with key deal drivers like corporate earnings, economic growth, and the quality and quantity of acquisition opportunities,” Gandier said, adding this could bode well for outbound deals.

However, according to E&Y Capital Confidence Barometer that tracks market sentiments, the optimism level in Mena is lower due partly to continued tensions in some regional countries.

Reported by: Caye Global News, Gulf Times

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