Egypt - In a recent report, PricewaterhouseCoopers (PwC) highlighted a 60% decline in mergers and acquisitions (M&A) activity in Egypt during the past year. This downturn had broader implications, affecting overall activity in the Middle East region. Let’s delve into the key points:

  1. Regional Impact:
    • The Middle East witnessed a 30% decline in the total number of deals, recording approximately 447 transactions compared to the previous year.
    • Notably, the Kingdom of Saudi Arabia and the United Arab Emirates maintained robust deal levels during the same period.
  2. Egypt’s Changing Trajectory:
    • Egypt had been on a positive trajectory, achieving a significant number of deals in the region.
    • However, several factors contributed to the decline:
      • Currency Fluctuations: The Egyptian pound (EGP) depreciated against the US dollar (USD).
      • Interest Rate Hikes: Rising interest rates impacted investment decisions.
      • General Economic Challenges: These hindered overall performance.
    • Despite these challenges, the devaluation of the pound attracted investors to sectors such as energy, health, financial services, and tourism.
  3. Foreign Investment Potential:
    • Egypt’s high population and existing infrastructure create opportunities for foreign investors.
    • Notably, the recent $35bn investment deal by ADQ in Ras Al-Hekma aims to transform the area into a global tourist destination.
  4. Prominent Deals:
    • The Emirati firm “Global Investments” secured a 30% stake in the shares of Eastern Company, Egypt’s largest tobacco manufacturer. This deal, valued at $625m, ranked third in terms of volume in 2023 across the Middle East.
  5. Middle East M&A Market Performance:
    • Despite global market fluctuations, the Middle East maintained consistent M&A performance in 2023.
    • While the first half of 2023 showed improvement over 2022, challenges like rising interest rates and economic slowdowns impacted overall recovery.
  6. Global Trends:
    • Globally, M&A activity declined significantly, shrinking to $2.5trn in 2023 (compared to the peak of $5trn in 2021).
    • The number of deals also decreased by 17%, totaling 55,000 last year (compared to 65,000 in 2021).
    • Deal makers adapted by focusing on smaller transactions, leveraging their flexibility under challenging circumstances.
  7. Small-Sized Deals:
    • In the Middle East, the trend leaned toward small-sized deals, often falling within the range of $100m or less.
    • These deals demonstrated resilience in the face of interest rate fluctuations, constituting approximately 92% of the total deals by the end of 2023.

The evolving landscape of mergers and acquisitions underscores the need for strategic decision-making in an ever-changing economic environment.

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