M&A deal values rise globally and in the Middle East in H1 2018: Baker McKenzie Report

• All Middle East M&A deal values increased by 62% year-on-year
• Cross-regional deal activity increased by value and volume compared to H1 2017
• The UAE continued to drive both inbound and outbound M&A in the region

Dubai, UAE – Global M&A deal-making was off to a strong start in the first half of 2018 (H1 2018), with overall global deal values rising by 59% to US$2.5 trillion compared to the same period in 2017 (H1 2017), despite deal volumes falling by 12%. The Middle East also sustained robust market activity with a 62% increase in deal values in H1 2018 compared to H1 2017, according to the latest report by global law firm Baker McKenzie*.

Total M&A deal activity during the first half of 2018 was characterized by less but higher value transactions. Cross-border M&A declined by 14% in terms of volume but aggregate value jumped by 81% during the comparative period. Likewise, domestic deal-making experienced a 12% decrease in volume, while total deal value rose by 46% on a year-on-year basis.

The United States (US) continued to be the most acquisitive and targeted region globally in H1 2018, with cross-border deal-making generating US$419 billion, a 51% increase from the same period in 2017. In the United Kingdom (UK), cross-border and domestic deal values spiked by a staggering 130% and 96% respectively, as the country explores investments abroad in the wake of Brexit developments. Chinese cross-border deal activity also made headway despite tighter scrutiny on Chinese transactions, with inbound deals amounting to US$33 billion and outbound deals totaling US$75.9 billion.

During H1 2018, the High Technology sector was the big winner in terms of total global deal volume, representing an 18% share. However, the Energy & Power sector attracted the highest aggregate deal value of US$379 billion, accounting for 15% of the total global deal value.

Middle East M&A activity

Sixty-five percent of all Middle East M&A activity was cross-border in nature in the first half of 2018 and the United Arab Emirates (UAE) continued to drive both inbound and outbound M&A in the region. The aggregate value of all Middle East M&A rose by 62% in H1 2018 compared to the same period last year, from US$15.7 billion to US$25.4 billion, with deal volume remaining at similar levels.

Cross-regional M&A deal activity also increased by value (up 22%) and volume (up 13%) in H1 2018 compared to H1 2017, with Emirates NBD Bank's US$3.2 billion acquisition of Turkey-based Denizbank AS ranked as the top cross-regional deal in H1 2018.

Domestic deal values in H1 2018 spiked three-fold compared to H1 2017, driven largely by the pending US$5 billion merger of Saudi Arabia British Bank (SABB) and Alawwal Bank in Saudi Arabia.

"Overall Middle East activity has been strong in H1 2018, with a significant uptick in aggregate values for both domestic and cross-regional deals compared to the same period last year," said Omar Momany, Head of Corporate/M&A at Baker McKenzie Habib Al Mulla, based in the UAE. "With a handful of standout mega deals and the governments across the Middle East cantering to implement investor-friendly reforms and policies, the region is set to experience promising levels of M&A activity in the second half of the year."

Inbound Cross-regional Middle East M&A

The value of cross-regional deals targeting the Middle East increased from US$6.4 billion in H1 2017 to US$8.1 billion in H1 2018, with a striking 174% increase in the first half of the year compared to the end of the second half of 2017. Inbound deal activity was driven by the acquisitions of Abu Dhabi National Oil Company's oil field concessions by Austria's OMG AV and French oil and gas giant Total SA, amounting to US$2.6 billion. Deal volume also rose by 26% in H1 2018 with a total of 54 inbound deals, compared to H1 2017.

The UAE was the most attractive target country to overseas investors in H1 2018, with a total of 34 inbound deals valued at US$6.6 billion. India and France were the top acquirer countries by volume, with seven deals each, while Austria was the top acquirer country by value, investing US$1.5 billion on one of the Abu Dhabi oilfield concessions.

The Energy & Power sector was the most attractive target sector in respect of inbound Middle East investment, both by volume and value in H1 2018, with a total of 15 deals amounting to US$7.4 billion.

"We continue to see healthy investor appetite and deployment of capital into the Middle East, particularly in the UAE with its strong underlying economic fundamentals and openness to foreign investment," said Will Seivewright, Corporate/M&A partner at Baker McKenzie Habib Al Mulla, based in the UAE.

Outbound Cross-regional Middle East M&A

By value, outbound cross-regional deals from the Middle East increased by 20%, from US$6.3 billion in H1 2017 compared to US$7.6 billion in H1 2018. Deal volume was also up by 9% in H1 2018 with a total of 82 outbound deals, compared to the first half of 2017.

The UAE was the most active acquirer country both by volume and value in H1 2018, comprising more than 75% of the total value of cross-regional deals originating from the Middle East, with US$5.8 billion out of 35 outbound deals. The US was the top target country by volume with 13 deals, while Turkey was the top target country by value as a result of the US$3.2 billion acquisition of Turkey-based Denizbank SA by Emirates NBD Bank.

The Industrials sector was the top target sector by volume of deals originating from the Middle East in H1 2018 with 16 outbound deals, followed by the Financial Services sector with 11 deals. The Financial Services sector was the top target sector by deal value, registering aggregate deal values of US$3.2 billion.

Karim Nassar, Corporate/Capital Markets partner at Baker McKenzie's associated firm in Saudi Arabia added, "The governments across the Middle East continue to drive their economic reform agenda and align with international standards, as evidenced by the privatization and consolidation trends across industry sectors in the region and the demand for capital and business growth overseas."  

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*Methodology

The information in this press release is based on Thomson Reuters data for global announced M&A transactions with standard exclusions. We define cross-border deal-making as any M&A activity involving a bidder and target based in separate countries, cross-regional (or interregional) deal-making as any M&A activity involving a bidder and target based in separate regions, and domestic deal-making as any M&A activity involving a bidder and target based in the same country.

For the purposes of this report, the Middle East was defined as: Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, United Arab Emirates and Yemen. M&A activity refers to all deals announced as at 28 June 2018.

About Baker McKenzie Habib Al Mulla

Baker McKenzie Habib Al Mulla brings over 30 years’ local know-how and extensive global resources to clients in the region, and is the only international law firm in the UAE with full rights of audience before all UAE and DIFC courts. We deliver unmatched on-the-ground support that reflects a deep understanding of local legal, regulatory and commercial practices. Our multidisciplinary team of 60 lawyers offers a full range of local and international legal advice across our offices in Dubai and Abu Dhabi, in both English and Arabic.

About Baker McKenzie

Baker McKenzie helps clients overcome the challenges of competing in the global economy. We solve complex legal problems across borders and practice areas. Our unique culture, developed over 65 years, enables our 13,000 people to understand local markets and navigate multiple jurisdictions, working together as trusted colleagues and friends to instill confidence in our clients. (www.bakermckenzie.com)

© Press Release 2018