European investment behind big M&A increase
Africa and the Middle East offer opportunities for investors keen to diversify into higher-risk regions with less competition and higher returns. European investors saw the region’s deal activity increase to six times that of Q1, reaching US$845m in Q2.
Greenfield investment, particularly by foreign multilateral development banks, outstripped brownfield investment, but increasing M&A signifies growing investor confidence.
Across the region, energy reforms remain a prime source of investment opportunities as governments work to increase the appeal of their markets to private capital. Many governments are also diversifying their energy mix as oil prices fall.
Q2 2017 transactional highlights
- European investors acquire assets in energy services and power generation. In one example, Engie invested US$775m in a 40% stake in Tabreed, a UAE-based company that provides innovative alternatives to traditional air-conditioning. Engie plans to use this acquisition to support expansion into emerging markets within the Middle East.
- Foreign players fund new energy and disruptive technology, with Facebook and Microsoft agreeing to partner with Allotrope Partners to help finance microgrids in Africa.
- More greenfield renewables projects, including plans by Bui Power to build a 250 MW solar-hydro plant in Ghana. Also in Ghana, Engie has partnered with eleQtra, a UK-based developer of power and transportation projects, to build a 50 MW wind project.
Deal value in Africa and the Middle East region (2010–Q2 2017)
Source: EY analysis based on Mergermarket data
Top Africa and the Middle East investment deals (Q2 2017)
All deal values indicated are disclosed enterprise values comprising equity and debt components
M&A capital outlook and investment hotspots
- Market reforms will drive investment, including in Saudi Arabia where integrated utility Marafiq plans to launch an IPO.
- Investment in greenfield renewable energy will continue, with an estimated US$212b to be invested in new generation in sub-Saharan Africa between 2017 through 2030, most of this in renewables.
- Egypt and Saudi Arabia remain hotspots for investment, with solar and wind projects in development.