MENA announced deal value spikes in H1 2019, driven by Saudi Aramco’s acquisition from PIF of a 70% stake in SABIC

Wednesday 24 July 2019
Matthew Benson, MENA Transaction Advisory Services Leader, EY
Dubai - MENA Herald:

The value of announced deals with disclosed value in the MENA region increased by 220.8% to US$115.5b in H1 2019, up from US$36.0b in H1 2018, according to the EY H1 MENA M&A report. However, deal volume witnessed a decrease of 10.7%, with 216 announced deals in H1 2019, down from 242 deals recorded in H1 2018.

The largest deal during H1 2019 was Saudi Aramco agreeing to acquire a 70% stake in SABIC worth US$69.1b from PIF.

In H1 2019, state-owned entities were involved in 55 deals (25% of total deals) amounting to US$104.5b, 90% of the total deal value, including mega deals involving Saudi Aramco, ADNOC and ADIA.

Matthew Benson, MENA Transaction Advisory Services Leader, EY, says: “MENA corporates are finding innovative ways to raise capital and have stepped up the frequency of their portfolio reviews. The EY Capital Confidence Barometer (CCB) report indicates that 61% of MENA executives say their companies are reviewing their portfolios every quarter or more frequently – more often than global executives. With more frequent portfolio reviews, several non-core businesses are set aside for divestment thereby fueling deal activity.

“A further 87% of MENA executives believe the global economy is improving, compared to 93% on average across all executives in the study, globally, while 82% share a similar sentiment about their domestic economy here in the MENA region. Looking ahead, we expect MENA companies to continue to reshape their portfolios to remain resilient to potential headwinds on the horizon, even as they actively pursue their ambitious growth objectives.”

Top five target sectors by deal value

In H1 2019, the chemicals sector had the highest deal value with US$69.3b due to the landmark Saudi Aramco – SABIC deal, followed by the oil and gas sector with US$14.2b. The provider care sector recorded US$10.3b, the banking and capital markets sector recorded US$5.1b in deal value, followed by the technology sector, which logged a deal value of US$4.3b, which included Uber’s $3.1b acquisition of Careem Networks.

Anil Menon, MENA M&A and Equity Capital Markets Leader, EY, says: “MENA executives are relatively more optimistic about the improving economic prospects while still keeping an eye on evolving geopolitical risks. The EY CCB report found that MENA executives are proactively pursuing strategic options to strengthen competitive advantage and accelerate growth in an era where technology continues to disrupt traditional business models.” 

Domestic M&A deal value driven by mega deals

H1 2019 saw an increase in domestic M&A activity in terms of deal value, with 111 deals amounting to US$79.3b, compared with 96 deals amounting to US$5.5b in H1 2018. Two mega strategic deals, as part of sector consolidation, drove the domestic activity by value – a chemicals sector deal in Saudi Arabia, worth US$69.1b and a deal in the banking and capital markets sector in the UAE, worth US$4.0b. 

In addition, MENA witnessed 65 outbound M&A deals amounting to US$21.0b compared with 77 deals amounting to US$18.2b in H1 2018. Strategic investments by sovereign wealth funds and state-owned enterprises, including mega deals by ADIA and Saudi Aramco, drove the MENA outbound activity.

A key highlight of H1 2019 was Uber’s acquisition of Careem Networks for US$3.1b, the largest technology sector transaction to date in the Middle East, as home-grown technology start-ups find themselves being pursued by global players.

UAE records the highest inbound investment

H1 2019 witnessed a fall in inbound M&A deal volume in the MENA region, with 40 deals amounting to US$15.1b compared with 69 deals recorded at a value of US$12.3b in H1 2018. The UAE was ranked the highest in terms of inbound M&A investment in the region, with 20 deals amounting to US$14.4b.  

The oil and gas sector was the top target sector for inbound activity, accounting for US$10.8b. Four out of the six inbound deals in the sector were in the UAE, including three mega deals, involving the ADNOC stake sale in its oil refining and pipeline business.

“The large sums of inbound M&A reinforces the MENA investment thesis. We continue to believe that these are good times for strategic acquisitions in MENA,” concludes Anil.

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