Both value and volume globally were down significantly on Q4 2015, as expected given it was the busiest quarter of a record year for M&A. Baker & McKenzie's Cross-Border M&A Index, which tracks quarterly deal activity using a baseline score of 100, dropped to 213 from its peak of 358 last quarter. However, it was still seven points higher than the same period last year.
Notably, the majority of all global M&A transactions in the first quarter have been cross-border, comprising 53% of value, well ahead of the 39% level seen in 2015 and the prior annual record of 43% seen in 2014. The most active sector by volume was Industrials with 194 deals in the quarter while Healthcare led the field by value with 92 deals worth US$54 billion. China's outbound M&A hit US$83.2 billion from 84 deals, a record value figure by Chinese acquirers for a single quarter, hoisting overall cross-border deal value for the quarter.
Although the Middle East Index dropped from its Q4 2015 record of 546.5 to 140.8 in Q1 2016, the cross-regional deal count remained steady, and the value of inbound M&A in Q1 2016 more than doubled that of Q4 2015, reaching US$2.5 billion.
"Despite an initial pause for breath after a record-breaking 2015 for cross-border M&A deals regionally and globally, Q1 2016 has continued to be very busy across the Middle East," said Will Seivewright, Corporate/M&A partner at Baker & McKenzie Habib Al Mulla, based in the UAE. "Developed markets are proving to be safe havens for Middle East acquirors, and similarly, the Middle East region remains attractive to cash rich international investors. Given the current healthy pipeline of both M&A and private equity related deal activity, we expect this trend to continue into the next quarter."
"Volatile capital markets, uncertainty of Chinese growth potential and political developments in the EU may have led investors to be more cautious at the start of the year, added George Sayen, Head of Corporate Practice Group at Baker & McKenzie's associated firm in Riyadh. "However, rebounding markets led to a significant increase in cross-regional M&A activity in the Middle East by the end of Q1 2016 and the coming months are likely to see this continue."
Inbound Middle East M&A
Cross-regional deals targeting the Middle East in Q1 2016 totaled 17 deals valued at US$2.5 billion, compared to 19 deals at US$1.2 billion in Q4 2015. The US$292 million acquisition of souq.com was the highest valued cross-regional deal targeting the UAE.
The Consumer (Foods) sector was the biggest by deal value in Q1 2016 at US$837 million, while the Computer Software sector continued its Q4 2015 lead by volume, with five deals valued at US$259 million.
Outbound Middle East M&A
Cross-regional deals fueled by the Middle East totaled 23 deals valued at US$1.1 billion in Q1 2016, with the acquisitive UAE driving four of the top five outbound deals, including Network International's acquisition of Emerging Markets Payments Group, Abraaj Capital Holding's acquisition of a 72% stake in Quality Care India, and Al Habtoor Group's acquisition of Hilton London Wembley Hotel.
South Africa was the top target country by value, followed by the USA and India, while the USA remained the top target country by deal volume, followed the UK and Turkey.
The top sector for outbound M&A by value was the Services sector with four deals valued at US$364 million, while the Leisure sector led by volume with five deals valued at US$298 million.
Baker & McKenzie's Cross-Border M&A Index is assesses the strength of worldwide cross-border M&A activity in each quarter since Q1 2010. Based on a weighted average of cross-border deal values and volumes in each quarter, we calculate a score from a baseline figure of 100, which represents the level of activity in 2009. That score provides an easy-to-understand indicator of how cross-border deal activity changes from quarter to quarter, enabling viewers to identify patterns.
We define cross-border deal-making as any M&A activity involving a bidder and target based on separate countries. The overall index score is comprised of four weighted sub-categories, giving slightly more weight to more ambitious deals between parties in two different regions.
Regions consist of Africa, Asia Pacific, the EU, Latin America, the Middle East, North America and Other Europe. All data underlying calculation of the index are sourced through Mergermarket. M&A activity refers to all deals announced as at 1 April 2016.
About Baker & McKenzie
Baker & McKenzie has been active in the Middle East and Africa for over 30 years, and as a pioneering firm, was most notably the first to enter both the Saudi Arabian and Egyptian markets, and the firm has since established a substantial presence. This began with an associated office in Riyadh in 1979, then opening offices in Cairo (1985), Bahrain (1998), Abu Dhabi (2009), Doha, Istanbul (both 2011), Johannesburg and Casablanca (both 2012). Baker & McKenzie's merger with leading UAE firm, Habib Al Mulla, marked the firm's arrival in Dubai in 2013, and in 2014, the firm opened an associated office in Jeddah.
Founded in 1949, Baker & McKenzie advises many of the world's most dynamic and successful business organizations through more than 11,000 people in 77 offices in 47 countries. The Firm is known for its global perspective, deep understanding of the local language and culture of business, uncompromising commitment to excellence, and world-class fluency in its client service. Global revenues for the fiscal year ended 30 June 2015 were US$2.43 billion. Eduardo Leite is Chairman of the Executive Committee. (www.bakermckenzie.com)
Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm
© Press Release 2016