5 minutos de lectura 20 dic 2019
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MENA executives remain optimistic about growth potential and M&A

5 minutos de lectura 20 dic 2019

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  • Global Capital Confidence Barometer – Edition 21 (pdf)

M&A and divestments prepare MENA companies for both growth and resilience against uncertainties.

When it comes to business opportunities, the Middle East and North Africa (MENA) region is currently an exciting place to be. In a complex world, investment appetite has been cooling in many of the so-called “BRIC” countries, with political instability, environmental issues and changing demographics creating uncertainty for investors around the world. By contrast, with a clearly recognized imperative for change, the Middle East is open for business. Accumulated government reserves and untapped oil stocks, combined with a relatively young population, will help finance future change, including a rapid shift toward a more diversified economy.

With such a strong potential for change and the funds to achieve it, MENA executives remain confident about both their economic prospects and about pursuing M&A to accelerate growth.

Perceptions about economic growth reflect a tale of two oil-rich countries

According to the results from the latest EY Global Capital Confidence Barometer, 68% of MENA respondents perceive that the global economy is growing, while 60% say their local economy is improving. However, it is a tale of two countries when it comes to the two dominant oil-dependent countries in the region. Where the United Arab Emirates (UAE) has been at the forefront of change for years, the Kingdom of Saudi Arabia (KSA) is now catching up. This transformative shift is reflected in each country’s growth perspectives. In KSA, large investments in infrastructure as part of the “Saudi Vision 2030” economic diversification program have KSA respondents feeling particularly bullish about growth (74% versus 49% a year ago). UAE lags slightly behind KSA in confidence. Even so, a healthy expansion in both the oil and non-oil sectors, as well as pro-growth government initiatives and rising investment ahead of Expo 2020, have 55% of UAE respondents feeling confident about growth (versus 41% a year ago).

Despite their confidence in the region’s potential for growth, MENA executives are bracing for challenges on the horizon. While only 28% of KSA respondents say they are expecting an economic downturn in the near to mid-term, 65% of UAE respondents and 90% of Egyptian respondents are anticipating economic challenges ahead.

Across the region, 37% of MENA respondents see geopolitical, local political and regulatory uncertainty as the greatest risks to the growth of their businesses. Such risks can be caused by both rapid change in the region, as well as the impact of the changing global economic climate and the possible impact that might have on the MENA region.

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MENA executives admit that digital and technology are having an impact on their companies

Disruption is also coming from increasing technological change. In response, almost three-quarters (74%) of MENA executives are anticipating an increase in cross-sector M&A driven by technology and digitalization advances. 

Cross-sector M&A


of MENA executives are anticipating an increase in cross-sector M&A driven by technology and digitalization advances.

M&A for the purpose of consolidation within the tech space has also had a disruptive impact in the region. In 2017, Amazon.com Inc. acquired Souq.com — known by many in the region as the Amazon of the Middle East. More recently, Uber Technologies Inc. acquired Middle Eastern ride-hailing company Careem.

Across the region, MENA companies are understanding, at least on some level, the imperative to develop more robust digital strategies to address increasing competitive pressures and changes in customer behavior. Governments appear to be the most progressive in this regard as they focus effort and investment capital on e-government initiatives. Corporates appear to be more cautious. More than half (56%) of MENA respondents say their digital capabilities are centralized under a chief digital officer or chief technology officer, versus 49% of global respondents. Meanwhile, only 37% say their companies are allocating 25% or more of their annual investment capital to digital and technology, versus 63% of global respondents. The good news is of those who are investing in digital and technology, 65% say the emphasis is on growth opportunities versus achieving internal efficiencies.

M&A and divestments prepare MENA companies for both growth and resilience against uncertainties

To remain resilient amid uncertainty and position themselves for transformative growth, 80% of MENA executives say they will be outsourcing or divesting some of their current operations. Slightly more than half expect the emphasis to be on offloading internal and back-office functions.

As MENA companies free up capital through divestments, 57% say they will be actively pursuing M&A in the next 12 months. In KSA, this percentage rises to 63%, while in UAE the percentage falls to 45%. For more than half (55%), the focus will be on assets that offer transitional capabilities, including digital technologies and new routes to customer, to augment and accelerate their growth agendas.

Over the next year, 89% of MENA respondents say they expect high competition for assets - 60% expect the competition to come from private capital. In KSA, 93% of executives expect to face increasing competition, versus 90% of Egyptian respondents and 81% of UAE respondents.

Competition for assets


of MENA respondents say they expect high competition for assets.

Interestingly, 61% of MENA respondents are considering M&A because of ongoing trade or tariff uncertainties, versus only 43% of global executives.

Looking ahead, there is continued but measured optimism

As we look ahead, MENA executives remain cautiously optimistic about global dealmaking in the next 12 months, with 55% saying they expect the global M&A market to improve and 58% seeing improvements in the local M&A market.

In 2020, we expect to see continued consolidation in select sectors and strategic buying by sovereigns and national oil companies, as well as increased capital allocation in the technology sector. Further, with governments such as UAE and KSA taking steps to enhance their FDI regimes and further diversify their economies, we anticipate healthy levels of M&A activity to continue to propel growth across the region.


The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas. 

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