Middle East M&A and IPO activity to remain attractive despite global economic uncertainty

Saudi Aramco's proposed floatation of 2% of its shares could boost Middle East IPO activity in 2020

A Saudi man inspects a screen showing stock prices at ANB Bank in Riyadh, Saudi Arabia September 16, 2019.

A Saudi man inspects a screen showing stock prices at ANB Bank in Riyadh, Saudi Arabia September 16, 2019.

REUTERS/Ahmed Yosri

Global deal-making will continue the downward trajectory in 2020 amid worldwide economic uncertainty but the Middle East and North America will remain relative bright spots, a new report showed.

Merger and Acquisition (M&A) value worldwide is projected to drop to $2.1 trillion in 2020, a decline of 25 percent compared to $2.8 trillion in 2019, according to the Global Transactions Forecast report by Baker McKenzie in association with Oxford Economics. The report forecasts Initial Public Offering (IPO) proceeds to decline by approximately 23.7 percent to $116 billion in 2020 from $152 billion in 2019.

“Make no mistake — deals are getting done, but the current slowdown is inevitable considering the continuing uncertainty around trade and regulation,” said Ai Ai Wong, Chair of Baker McKenzie’s Global Transactional Group. “We know that around the world, there are many investors and companies with capital on the sidelines, waiting to move forward with domestic and cross-border deals.”

Deal-making in the Middle East remains robust in 2019 due to strong domestic activity, the report said, citing as examples, Saudi British Bank’s $5 billion merger with Alawwal bank and Abu Dhabi National Oil Company’s $4 billion stake sale in its pipeline unit to KKR and Blackrock.

It said the region anticipates to close $45 billion in M&A deals in 2019, and fall in line with global trends in 2020 though Saudi Aramco’s $69 billion purchase of a 70 percent stake in Saudi Basic Industries (SABIC) is expected to boost M&A proceeds in 2020.

On the other hand, Saudi Aramco’s proposed flotation of two percent of its shares could see the region’s IPO proceeds jump 20-fold to more than $40 billion in 2020 compared to $2 billion in 2019.

“The M&A markets particularly in Saudi Arabia and the UAE have remained buoyant this year, with transaction values boosted by mega deals such as the ground-breaking merger of Saudi British Bank and Alawwal bank, and by cross-border inflows into the UAE, facilitated by recent foreign investment reforms,” said Omar Momany, UAE Head of Corporate/M&A at Baker McKenzie Habib Al Mulla.

“Although we expect deal values to return to normal levels in the coming years, the Middle East is likely to remain an attractive target region for both domestic and foreign investors,” Momany added.

The report also noted that transactions activity is expected to pick up in 2021 as the global economy rebounds.

(Reporting by Gerard Aoun, editing by Anoop Menon)


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© ZAWYA 2019

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