Middle East merger and acquisition deals value climbs 50% boosted by mega transactions

The value of merger and acquisition deals in the Middle East soared 50 per cent year-on-year in 2018 as the number of transactions valued at $1 billion (Dh3.67bn) or more climbed, with the UAE claiming the top spot.

Although the number of total Middle East deals at the end of last year was almost identical to 2017, the rise in value was spurred by deals such as Saudi British Bank’s $5bn merger with Alawwal Bank in Saudi Arabia, law firm Baker McKenzie said in its latest report on global M&A activity released on Wednesday. In total, 10 deals were valued at more than $1bn in 2018 where the target and/or acquirer was based in the Middle East.

"Despite challenging global market conditions in 2018, companies continue to see the value in M&A for growth and expansion, but also appear to be divesting assets to focus on core or more profitable businesses,” said Omar Momany, UAE head of corporate and M&A at Baker McKenzie Habib Al Mulla. "There was a significant amount of consolidation in the Middle East in 2018, particularly, in the financial services sector.”

Geopolitical headwinds and regulatory risk may weigh on dealmakers’ minds, the law firm said, although legislative reforms for the foreign direct investment regimes in the region could balance the trend and attract more direct investments in 2019.

In terms of inbound deals the value of cross-regional deals targeting the Middle East increased to $11.3bn in 2018 from $9.4bn the previous year. Deal volume, however, fell by 13 per cent year-on-year with a total of 92 inbound transactions in 2018.

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The UAE, the Arab world's second biggest economy, remained the most attractive target country to overseas investors last year, with a total of 59 inbound deals valued at $7.7bn, followed by Saudi Arabia with 12 transactions amounting to $1.05bn

The majority of inbound cross-regional deals were focused on the energy and power sector, with a total of 20 transactions valued at $8.7bn as the hydrocarbon-rich sovereigns in the region continue to diversify their economies, according to the study.

The value of outbound cross-regional deals from the Middle East increased by 53 per cent year-on-year to $17.5bn in 2018. The UAE again remained the most active acquirer country both by volume and value, with a total of 89 transactions valued at $9.4bn.

Global merger and acquisition deal values soared in 2018, rising by 19 per cent to $4 trillion, although deal volumes dropped by 8 per cent year-on-year, according to the report.