UAE tops Mena M&A activity in first nine months of 2022 even as overall deal value drops

The value of mergers and acquisitions in the Middle East and North Africa region dropped to $55.2 billion through the first three quarters of 2022, despite a growth in the number of deals, as economic uncertainties weighed on activity, EY said in a report.

The value of activity declined 23 per cent year-on-year amid a modest 6 per cent rise in deals, which climbed to 524 from a year ago, as rising inflationary pressures, dampening demand and global market disruptions weighed on the sector, the London-based consultancy said in its EY Mena M&A Insights report on Monday.

The study said the UAE remained the top market for M&A activity, with 155 deals worth $17.2bn forged through the first nine months of 2022, followed by Egypt with 99 deals worth $3.9bn.

Saudi Arabia, the Arab world's largest economy, closed 58 deals worth $3.4bn. Morocco, with 22 deals valued at $1.9bn, and Oman, with 10 deals worth $700 million, rounded out the top five.

Despite the decreased value and challenging economic climate, the economic and technology strategies of Mena countries have helped it remain an attractive market for M&A activity, Brad Watson, strategy and transactions leader at EY Mena, said in the report.

“Although we are living in uncertain economic times, the Mena region continues to record higher M&A activity, fuelled by expected economic growth through higher oil prices and an acceleration in business-friendly reforms,” he said.

“Technology is driving a large number of deals, reflecting the rising digital transformation across industries in the region.”

Companies across the region are continuously considering and tapping into M&As, as they seek to gain access to or open up new markets, which in turn will strengthen their customer base and provide additional revenue streams to boost their bottom lines.

Domestic M&A activity inched down 3 per cent in the first nine months of 2022 on 268 deals, dragging its total value down 48 per cent to $18bn from $34.6bn a year ago, the EY report showed.

Notable deals during the nine-month period include Ghitha Holding's acquisition of Tamween Management for $2.4bn, Emaar Properties' takeover of Dubai Creek Harbour worth $2.042bn, Q Holding's acquisition of Reem Investments for $1.6bn and Saudi Arabia’s Public Investment Fund acquiring a 16.8 per cent stake in Kingdom Holding Company for $1.5bn.

In Abu Dhabi, one of the biggest deals was Alpha Dhabi Holding's acquisition of a 17 per cent stake in Aldar Properties for $1.452bn. Alpha Dhabi, a subsidiary of Abu Dhabi-listed conglomerate International Holding Company, eventually increased its stake to become the property developer's parent company.

Inbound deals into Mena, meanwhile, rose to 119 in the first nine months of the year, up from 105 a year earlier, with business-friendly reforms, rising oil prices and the easing of travel restrictions allowing for greater activity.

The UAE remained the favoured investment destination, with 62 deals worth $7.4bn during the period. The technology sector was the most active: out of 37 technology deals in Mena, 23 deals flowed into the UAE, in line with the government's push for a digital-first economy.

The same factors are expected to create a more level playing field in Mena, with each country having its own propositions to attract inflows, said Anil Menon, head of Mena M&A at EY.

“What is interesting from these latest results is the increasing M&A activity, not just emanating from traditional markets such as the UAE and Saudi Arabia, but also from other countries across the Mena region, namely Egypt, Morocco, Qatar and Oman,” he said.

“Higher crude oil prices, combined with favourable regional government initiatives in attracting investments to the region and Mena investors looking for futuristic investment opportunities in foreign markets will be the major drivers of M&A activity in the region going forward.”

Outbound activity rose in the first nine months of 2022, with the value more than doubling to $27.2bn on 137 deals from $11.9bn on 113 deals a year ago.

The UAE again posted the highest number of outbound deals, with the biggest being telecom company e&'s acquisition of a 9.8 per cent stake in the UK’s Vodafone Group in a deal worth $4.4bn.