The MENA region witnessed 524 deals worth $55.2 billion during the first nine months of the year, according to the latest EY MENA M&A Insights report.

Rising inflationary pressures, dampening economic demand and global market disruptions resulted in moderate growth in deal activity of 6% year-on-year (YoY) while deal value slipped by 23% over the same period last year, the report said.

According to the report, domestic deals were the main driver of activity in the region, contributing 51% and 33% of the total M&A deal volume and value respectively over the nine-month period.

M&A activity involving private equity (PE) or sovereign wealth funds (SWF) accounted for 35% and 38% of the total deal volume and value respectively across the nine months. The report revealed that cross-border deals made up 49% and 67% of total volume and value respectively over the period. While government-related entity (GRE)-involved deals totaled US$21.0 billion in 9M 2022, accounting for 38% of the total disclosed deal value.

Technology driving deals

Brad Watson, EY MENA Strategy and Transactions Leader, says: “Although we are living in uncertain economic times, the MENA region continues to record higher M&A activity, fueled by expected economic growth through higher oil prices and an acceleration in business-friendly reforms. Technology is driving a large number of deals, reflecting the rising digital transformation across industries in the region.”

The top five MENA target countries by deal value were UAE, Egypt, Saudi Arabia, Morocco and Oman.

The United Arab Emirates (UAE) remained at the forefront of the MENA region, with 155 deals signed worth $17.2 billion in the first nine months of 2022. This was followed by Egypt with 99 deals worth $3.9 billion, Saudi Arabia with 58 deals worth $3.4 billion, Morocco with 22 deals worth $1.9 billion and Oman, where 10 deals have been inked with a total value of $0.7 billion.

Overall top five subsectors in the MENA region, by deal value, include transportation, real estate, consumer products, technology, and banking and capital markets.

Anil Menon, Head of MENA M&A and ECM Leader, EY, says: “What is interesting from these latest results is the increasing M&A activity, not just emanating from traditional markets such as the UAE and Saudi Arabia, but also from other countries across the MENA region, namely Egypt, Morocco, Qatar and Oman. Higher crude oil prices, combined with favorable regional government initiatives in attracting investments to the region and MENA investors looking for futuristic investment opportunities in foreign markets will be the major drivers of M&A activity in the region going forward.”

Domestic deals in the MENA region

Domestic M&A activity saw a slight dip of 3% in 9M 2022, with 268 deals signed, compared to 275 deals for the corresponding period last year. The value of deals also dropped, by 48%, amounting to $18 billion, compared to $34.6 billion in the opening nine months of 2021. Excluding the deal involving the acquisition of utilities and power assets of Aramco by Air Products and Chemicals Inc ($12.0 billion) in 9M 2021, deal value went down by 20% in 9M 2022.

Egypt witnessed a surge of 37% in domestic deal activity in terms of deal volume in 9M 2022. The Egyptian government’s decision to sell several state-owned industries to help its struggling economy has attracted Gulf investors into the region.

Over the nine-month period, Ghitha Holding agreed to acquire Tamween Management for $2.4 billion; Dubai Creek Harbour was acquired by Emaar Properties in a deal worth $2.042 billion; Q Holding acquired Reem Investments for $1.6 billion; Saudi Arabia’s Public Investment Fund acquired a 16.8% stake in Kingdom Holding Company for $1.5 billion; and International Holdings Company, Alpha Dhabi Holding acquired a 17% stake in Aldar Properties for $1.452 billion.

Inbound deals to the MENA region

Acceleration in business-friendly reforms, rising oil prices and the easing of government travel restrictions resulted in higher inbound deal volume in the MENA region, with 119 deals in 9M 2022 compared with 105 deals in the corresponding period the previous year.

The UAE continued to be the favored investment destination in 9M 2022 (62 deals worth $7.4 billion), supported by the reforms to strengthen its business environment, attract foreign investment, and incentivise companies to set up or expand their operations. The technology sector witnessed the highest deal activity in terms of deal volume and out of 37 technology deals, 23 deals were flowing into the UAE, reflecting the regional government’s appetite for digital transformation.

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