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Country mirrors global trend
According to KPMG reports, globally the appetite for mergers and acquisitions (M&A) and the capacity for businesses to enter into and fund deals will increase during FY16 by 4% and 13% respectively as compared to FY15. The positive outlook is mirrored across the Middle East, with an expected increase in M&As of 3% and the capacity to fund deals increasing by 18%. In Qatar, we are seeing similar trends - with increases in the number of M&As.
Looking at cross border deals, developed market investments into emerging markets hit a 10-year low, but deals among emerging market show strong growth with deals in the Middle East and North Africa up significantly.
Hady Kotry, expert in M&As at KPMG in Qatar said: "There are a number of socio-economic reasons that are likely to have contributed to the increase in deals. Over the past few years, we have seen recession hitting some countries, unexpected fluctuations in commodity prices and the huge need for businesses to keep up with ever-developing technology. These factors have seen an increasing number of businesses folding and unable to adapt to new market conditions. With high GDP and effective government planning, Qatar has been relatively well protected from this."
Current economic conditions have resulted in greater complexities for businesses who need to access funding. Banks need to meet increasingly restrictive regulations like Basel III and do not want to risk high non-performing loan ratios. It is therefore becoming necessary for business owners to explore alternative ways to raise capital including, mergers, aligning with a strategic partner and initial public offerings (IPOs).
There are various factors in Qatar, which are likely to be supporting the growth in deals. The expected launch of the SME index in Qatar Exchange, accompanied with QDB's ongoing support for SMEs and family businesses to grow their organizations, with a view to listing is certainly bolstering this sector. Similarly, the government is supporting the private sector with diversification, helping many businesses identify and undertake new commercial opportunities, both locally and overseas. Deals being made with businesses out of the country are also on the rise as Qatar based businesses are realizing the long-term benefits of the current decreases in the global share prices affecting some markets.
In line with these global shifts, Qatar is seeing an increasing pace of demand for due diligence services, with clients looking to the firm to identify any potential issues prior to investing in, merging with or purchasing a business.
Kotry continued: "M&As are a critical tool for achieving growth, and the increase in due diligence requests from clients in Qatar is a positive sign that the country's businesses are not only planning more deals and investments but are taking a long-term view to these. Accumulated, exaggerated business valuations can lead to serious implications in tough economic times. So having a clear, accurate understanding of business with which you intend to merge, acquire or invest in is vital."
KPMG in Qatar was established nearly 40 years ago and now employs over 250 staff, led by 10 partners. The firm provides audit, tax, and advisory services to a wide range of clients operating in different sectors in the country. Our Deal advisory experts help clients with all their transactions and restructuring needs including buying, selling and fixing a business, funding and partnering.
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About KPMG:
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 172,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
For further information, contact:
Joanne Harris - Communications Manager
KPMG in Qatar and Bahrain
Mob: +974 33878017
Ph: +974 4457 6444
joanneh@kpmg.com
© Press Release 2016
