MENA M&A deal value up 23% in Q3 2017: EY

Dubai – 27 November 2017

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  • 65% of MENA executives would actively pursue mergers and acquisitions in the next 12 months
  • 63% of MENA executives expressing positive sentiments around corporate earnings
  • 53% of MENA executives feel more optimistic about credit availability

In the third quarter of 2017, a total of 76 deals were announced, a decrease of 10% when compared to the 84 deals in Q3 of 2016. MENA M&A deal value, however increased by 23% to US$ 4.3 billion, up from US$ 3.5 billion in Q3 2016 according to the EY Q3 2017 M&A report.

Phil Gandier, MENA Transaction Advisory Services Leader, EY, says:
“MENA executives continue to remain confident about the M&A market. According to the latest EY Capital Confidence Barometer, a record 65% of respondents indicated their intention to actively pursue deals in the next 12 months. With the recent oil prices, a slow-growth environment and the diversification agendas  of many MENA countries still more in the planning than execution stages, MENA executives understand that they need to ‘buy’ versus ‘build’ to remain competitive.”

Domestic M&A saw the largest y-o-y improvement, increasing by 17% in number and 343% in value. Furthermore, the average size of domestic deals rose by 258% compared to Q3 2016. However, inbound and outbound deals did not fare as well, decreasing by 21% and 26%, respectively compared to Q3 2016.

The largest deal announced in  Q3 2017 (pending regulatory approvals and completion) was the acquisition of a minority stake in Banque Saudi Fransi for US $1.5 billion by Kingdom Holding Company (KHC).

Saudi Arabia ranked the highest among the MENA countries by value in Q3 2017 with five deals amounting to US$ 1.6 billion. Kuwait followed with five deals valued at US$ 914.8 million, and the UAE with 21 deals amounting to US$ 547.4 million.

Of the 76 MENA deals in Q3 2017, banking and capital markets was the top performing sector by deal value reaching US$ 1.5 billion, followed by the telecom sector with a total deal value of US$ 847 million.

Digital advancements drive deal-making

MENA executives are feeling pressure as current business models undergo change, with nearly one-third citing the impact of digital technology and transformation as the primary force propelling changing customer behaviors and heightening threats from digitally enabled competitors and start-ups.

Anil Menon, MENA M&A and Equity Capital Markets Leader, says:
“To some extent we are in uncharted territory with strategic acquirers viewing this as the best time to make long term bets and sellers grappling with pricing-in policy ambiguity and volatile geopolitics. With MENA private equity turning net sellers, we expect the valuation gap to decrease.”

According to the CCB survey, MENA corporate and capital market indicators are looking positive; 63% of MENA executives expressed favorable sentiments towards corporate earnings (up from 18% a year ago) and 53% feel more optimistic about credit availability.

“As we look ahead, M&A will remain a vital component of MENA companies’ growth strategy in the foreseeable future, as they continue to take advantage of low interest rates and low growth environment to secure an enduring competitive edge,” comments Phil.

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EY | Assurance | Tax | Transactions | Advisory

About the Capital Confidence Barometer

The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook, and identifies boardroom trends and practices in the way companies manage their capital agendas — EY framework for strategically managing capital. It is a regular survey of senior executives from large companies around the world, conducted by Euromoney Institutional Investor Thought Leadership (EIITL). The panel comprises select global EY clients and contacts and regular EIITL contributors.

About EY

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The MENA practice of EY has been operating in the region since 1923. For more than 90 years, we have grown to more than 6,000 people united across 20 offices and 15 countries, sharing the same values and an unwavering commitment to quality. As an organization, we continue to develop outstanding leaders who deliver exceptional services to our clients and who contribute to our communities. We are proud of our accomplishments over the years, reaffirming our position as the largest and most established professional services organization in the region.

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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