MENA M&A activity in H1 valued at $43.8b

MUSCAT: According to the EY MENA M&A Insights H1 2023 update, the MENA region witnessed a total of 318 merger and acquisition (M&A) deals amounting to $43.8b. The GCC region accounted for the majority of deals – 254, valued at $42.5b. Compared with H1 2022, deal volume during this period was down by 14%, while deal value saw a slight increase of 0.4%.

The M&A market in the first six months of the year was consistent with the trends observed in the second half of 2022. While deals continued notwithstanding the dampened economic outlook, high interest rates, recession fears, inflationary environment and geopolitical tensions, deal-makers seemed to be adopting a cautious approach given the uncertain market conditions.

Sovereign wealth funds (SWFs), such as Abu Dhabi Investment Authority (ADIA) and Mubadala from the United Arab Emirates (UAE) and the Public Investment Fund (PIF) from the Kingdom of Saudi Arabia (KSA), continued to lead the deal activity in the region to support their countries’ economic strategies.

Cross-border deals accounted for 57% and 85% of the total deal volume and value respectively, becoming more popular among growth-focused companies. Outbound deals represented 32% of the total M&A deal volume and 70% of the value.

Deals involving government-related entities (GREs) amounted to a total value of US$29.9b, accounting for 68% of the total disclosed deal value and 19% of the deal volume. Meanwhile, transactions involving private equity (PE) or SWFs constituted around 23% and 53% of the total deal volume and value respectively.

In terms of sectors, technology contributed $15b to the total deal volume, followed by chemicals with US$11.9b and, offset by a wide gap, provider care with $3.3b.

The UAE dominated the lists of target countries as well as bidder countries by value last year, followed by KSA and Kuwait in both rankings. Egypt and Oman also made it among the top five bidder countries, while Bahrain and Qatar made an appearance among the top five target countries by value.

As before, Canada was the largest acquiring country outside the region by volume with transactions worth a total of $2.6b; however, France marked the highest number of inbound MENA deals with 13 in H1 2023.

Brad Watson, EY MENA Strategy and Transactions Leader, says: “Inflation has fallen in most economies in recent months due to the downturn in energy prices, even though food and services prices have continued to rise rapidly. Dealmaking got off to a slow start in 2023 with rising interest rates, persistent inflation and economic uncertainty weighing heavily on M&A activity. Despite the marked drops witnessed across the board, the UAE remained the favored investment destination in the first half of the year, driven by government reforms that continue to attract investment into the country.”

Anil Menon, EY MENA Head of M&A and Equity Capital Markets Leader, adds: “In line with historical trends, the technology sector witnessed the highest inbound and domestic deal activity in H1 2023. During this period, we saw a tremendous increase in deal value, contributed by two large deals. Investor interest focused mainly on cybersecurity, cloud computing, fintech and ecommerce, clearly indicating the segments that are poised to shape the future of the industry.”