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After a challenging year where M&A activity in the Middle East and North Africa took a tumble, Morgan Stanley forecasts 2025 will witness a significant “structural upswing” in transaction volume and value size, bolstered by policy shifts and regulatory reforms in the region.
The investment bank, which ranked as the leading M&A financial advisor in MENA last year according to a new LSEG report, served as advisors on nine deals in 2024 at a combined value of $31.8 billion, followed by Rothschild & Co. and Goldman Sachs rounding up the top three at $22.7 billion and $19.54 billion, respectively.
According to LSEG data, last year saw a total of 1,111 M&A transactions with exposure to the MENA region, accounting to a total of $75 billion in value. While this indicated a 4% drop compared to 2023, the number of deals increased by 1%.
Patrick Delivanis, Regional Co-Head of MENA Morgan Stanley, summed up the bank’s 2024 roster: “If you look at three of the larger transactions that we were involved in, they each had different characteristics…. One characteristic was the larger MENA corporates looking to invest and deploy capital internationally, another was the outward investment of a sovereign wealth fund into Asia, in turn securing the inward development of manufacturing facilities into the country, and finally the inward investment to the region by a global asset manager in the form of an acquisition of a GCC-based company.”
The LSEG ‘Investment Banking Activity in MENA 2024’ report listed state-oil giant Adnoc’s $17.6 billion takeover offer for German chemicals company Covestro as the biggest deal of last year, for which Morgan Stanley was an advisor.
Other high-profile MENA deals the bank was involved with in 2024 included advising Alat, the Saudi Public Investment Fund unit, in its $2 billion investment in Lenovo, followed by the acquisition of the Dubai-based payments provider Network International by Canada’s Brookfield Asset Management in a deal valued at $2.8 billion.
Changing landscape
The changing investment landscape in the region is key to driving more M&A transactions, Morgan Stanley said.
“It is because of these policy shifts and regulatory reforms that investors are attracted to the MENA markets,” said Abdulaziz Alajaji, Regional Co-Head of MENA Morgan Stanley. “International investors are seeing greater opportunities, and this makes it easier for them to deploy capital because they are able to exit and recycle their capital on clearer terms.
“The regulations allowing exits from investment, whether through a trade sale or IPO, are key contributors to this uptick in activity as the ability to IPO is easier and more consistent with an international approach because the region is well regarded and seen as a good place to do business.”
Delivanis said that while most of transactions, have been concentrated in Saudi and the UAE, “there is a healthy broader market across the GCC with an increase in activity in Qatar, Kuwait, Bahrain, and Oman.”
Deployment of capital
LSEG data further revealed that inbound deals involving a non-MENA acquiror increased 49% in value to a three-year high of $14.2 billion, while MENA outbound M&A transactions totalled $40.2 billion, indicating a 3% decline from year ago levels.
According to Alajaji, MENA has traditionally been perceived as an exporter of capital. “What has changed over the past few years is that MENA is also very much open to and promoting inbound investment. This makes the region unique in many respects from a global capital flow point of view; in addition, the pace of social reform… makes investors more comfortable.”
The “more active” sectors Delivanis highlighted include healthcare, technology, space, Artificial Intelligence as well as those where the region will typically enjoy a competitive advantage such as in trade and logistics, energy, and chemicals.
The LSEG report noted industrials as the most active sector, accounting for 27% of MENA target M&A om 2024, followed by materials and the financial sector.
Road ahead
Despite shifting global dynamics, fluctuating interest rates, and a Donald Trump US Presidency expected to pose challenges to the MENA landscape, Morgan Stanley maintains a positive outlook.
“We recently established our regional headquarters in Saudi Arabia, established an office in ADGM to complement our long-standing presence in Dubai, and strengthened our team in Qatar with a new country head,” said Aljaji, calling 2025 a year where the bank sees itself “investing in the region” in light of a “structural upswing in transaction volumes and value size.”
On a macro level, Delivanis added that growth in MENA is expected to continue in the near-term with opportunities in the global energy transition and evidence of global clients investing in the region.
(Reporting by Bindu Rai, editing by Seban Scaria)