Lumina Capital advisers predicts 2022 to be a bumper year for cross-border M&A

• FTSE listed companies’ revenue generated from the MENA region up by 15% since 2018
• ESG investment in focus – marking core diversification from oil sectors – with growth also seen in travel and tourism, aerospace, healthcare and infrastructure
• Family Offices replacing PE – highly active across tech sectors to import know-how and skills into the region
• A bumper year forecast fueled by trade agreements and government-led investment commitments

Dubai, United Arab Emirates/ Riyadh, KSA: Lumina Capital Advisers has recently launched its 2022 cross-border insights report assessing the factors that are contributing to the growth in cross-border transaction activity between the UK and the Middle East. In the report, Lumina notes the growth in UK-to-Middle East and North Africa (MENA) cross-border trade and deal activity between 2018- 2020, fuelled by Brexit, revenue diversification opportunities and the spotlight on MENA non-oil sectors and predicts 2022 to be a record year for cross-border M&A.

UK businesses have been expanding their operations across the Middle East as a result of Brexit-fuelled global geographic expansion. Since 2018, the Middle East's contribution to overall revenue has increased by 1% Y-o-Y. In 2020, the MENA region generated 14% of revenue for FTSE listed companies, compared to 13% in 2019 and 12% in 2018. Lumina Capital Advisors anticipates that this Y-o-Y growth will continue in 2022, with the percentage of MENA revenues generated by FTSE listed companies exceeding 15% by year end.

FTSE listed MENA companies in the Oil & Gas sector contributed 18% of the total revenue generated in 2020 compared with 33% in 2018. While some of this reduction is linked to lower oil prices, it also reflects the wide range of regional Government initiatives to launch, develop and grow income from non-oil and gas sectors. Revenue from the aerospace, healthcare, and infrastructure sectors are on the rise. Moreover, with the focus on giga projects like NEOM, the travel and tourism sectors are also expected to rebound significantly as the GCC looks to capitalize on key events like Expo 2020 and advancements in sport and music events like F1.

Andrew Nichol, Partner, Lumina Capital Advisers comments: “There is a significant push in a number of key sectors as the GCC looks to diversify away from oil and establish itself as a key player in the aerospace, healthcare, and infrastructure markets. Moreover, GCC countries are committed to being important players in the energy sector and are making significant ESG investments in other geographies with the objective of bringing these innovations to the region. Additionally, we are seeing strong growth in the technology sector, where the GCC has a young, tech-savvy population to tap into as the world continues to innovate through technology. Several GCC countries have taken notable steps to advance this agenda, including the establishment of a number of Fintech regulatory sandboxes (e.g. DIFC Fintech Hive) and a number of technology-specific government investment funds. Lumina was the first to witness this, having advised on a deal to bring Amara's ecommerce platform to the region, with KSA operations becoming one of their fastest growing markets.”

While UK companies already established in the region are growing their operations, Lumina also sees new companies eyeing up the MENA opportunity and expanding to the region for the first time. The number of FTSE listed companies with operations in the MENA increased from 22 to 25 between 2018 and 2020. As the Middle East continues its move away from oil, improving business entry and environments and focusing on sustainability and ESG commitments, the MENA region has become an attractive opportunity for businesses to diversify their revenues in a relatively higher growth market.

While there are multiple examples of capital flowing from the UK into the GCC, capital is also moving back the other way, with a number of high- profile investments being announced in recent months. Mubadala’s GBP10bn commitment into UK clean energy and tech sectors and SABIC’s Teeside investment provide recent examples of the GCC’s push into ESG. PIF’s investment in Newcastle Football Club is seen as an opportunity to both raise the profile of the region and bring ties closer with the UK.

George Traub, Managing Partner, Lumina Capital Advisers adds: “The recent free trade agreement negotiations between the GCC and the UK will have a significant impact on future M&A activity. The reduction in trade barriers and establishment of a more secure regulatory environment will encourage UK firms to the region as the GCC looks to imports skills not currently available to them. This is also on the back of Brexit where this is a key move for the UK as they seek to highlight and maintain their position as a world player while taking advantage of their ability to form their own trade agreements.”

A copy of the 2022 Lumina Cross-Border Insights paper can be downloaded here.

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About Lumina Capital Advisers Limited (LUMINA):

Lumina Capital Advisers Limited (“Lumina”) focuses on matching capital and transactions between the Middle East and the UK. With offices in London, Dubai and Riyadh, Lumina’s team of experienced dealmakers brings senior level international expertise to family conglomerates and private equity clients from the region, the UK or around the world.

With over 100 years of collective experience, the team at Lumina has advised on more than 100 M&A, financing and restructuring transactions across the globe. They have consistently delivered unconflicted, dynamic and international standards of deal execution with long-standing counterparty relationships.

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© Press Release 2022