The number of closed M&A (merger and acquisition) transactions in the GCC for the first quarter witnessed a 52 per cent decline when compared to the same period last year, while it fell 51% over the previous quarter, according to a report by Kuwait Financial Centre (Markaz).
None of the GCC countries recorded a growth in the number of closed transactions relative to the previous quarter, thanks to the havoc created by the Covid-19 outbreak.
The GCC economy experienced a significant slowdown due to the pandemic and the uncertainty it has caused. As such, this has significantly impacted the level of M&A activity throughout the quarter, stated the report issued by the Investment Banking Department at Markaz.
A majority of the transactions completed during Q1 2020 and Q4 2019 were carried out by GCC acquirers. Of the total number of Q1 transactions, GCC acquirers accounted for 92% while foreign acquirers accounted for 4% and the remaining 4% represents transactions for which the buyer information was not available, it stated.
The market witnessed a similar pattern during the previous quarter in Q4 2019 as GCC acquirers accounted for 71% of the total number of closed transactions while foreign acquirers accounted for 24%.
Regionwise, the UAE’s logistics sector topped the GCC M&A transactions list with Port & Free Zone's 20% stake buy in a fellow logistics company, DP World, for $2.7 billion. The firm currently holds 80% of DP World’s existing share capital.
The next two transactions involved UAE buyers, both of whom fully acquired local companies. The first was Gulf Capital acquiring 100% of IVI-RMA Middle East, one of the fastest growing providers of fertility treatment services, for a total value of $100 million.
The second transaction involved Mastek Arabia fully acquiring the Middle Eastern arm of Evolutionary Systems Arabia, an IT-focused consulting firm, for $65 million.
The second largest transaction in the region was by Qatar Petroleum, which acquired a 25% stake in Qatar Fertiliser Company for $1 billion.
The third was Saudi with its Jazan Energy & Development Company announcing the merger of its international aquaculture unit with three local aquaculture companies.
Under the terms of this deal, Jazan will own a 45% stake worth $60 million in Advanced Aquaculture Company (the merged entity).
According to Markaz, a majority of the Gulf acquirers preferred acquiring local or regional companies as opposed to acquiring foreign targets. The UAE, Kuwait and Saudi Arabia were the most active players in terms of local activity while the remaining acquirers each closed one transaction in their home countries.
In addition, the UAE surpassed its GCC counterparts and reported seven closed transactions that involved foreign targets whereas Bahrain, Kuwait and Saudi Arabia closed one transaction each. Lastly, neither Oman nor Qatar closed any transactions involving foreign targets, stated the report.
Compared to the previous quarter, the market attracted a significantly lower level of interest from foreign buyers, which again, was in large part related to the global slowdown.
Overall, there was only one closed transaction that involved a foreign buyer, which is 92% lower relative to Q4 2019 and a decrease of 94% relative to Q1 2019.
The one transaction that closed oversaw the Spanish company, Aqualia buy a 51% stake in Qatarat Saqia Desalination Company for an undisclosed amount.
The transactions that closed throughout the quarter spanned across multiple sectors which was also observed in the previous quarter.
With that being said, the sectors that witnessed the greatest level of activity throughout Q1 2020 were the Financials, Information Technology and Industrials sector.
These three sectors collectively accounted for almost 50% of the total transactions that closed throughout the quarter. Lastly, the quarter recorded activity in three new sectors and they are the Aviation, Construction and Telecommunication Services sectors.
By the end of Q1 2020, there was a total of 14 announced transactions in the pipeline, which was the same as the previous quarter.
Roughly 58% of these transactions involved UAE targets while the remaining portion equally involved both Kuwaiti and Saudi targets. Neither Bahrain, Oman nor Qatar had announced any transactions throughout the quarter.-TradeArabia News Service
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