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Mena merger activity hits ‘unprecedented’ levels

Terminal 4 at DP World's Jebel Ali Port – which formed part of the region's biggest M&A deal in 2022 Reuters/ Hamad I Mohammed
Terminal 4 at DP World's Jebel Ali Port – which formed part of the region's biggest M&A deal in 2022
  • Middle East and North Africa recorded 754 deals in 2022, says EY
  • Investor confidence boosted by high oil prices and government reforms
  • ‘Exceptionally buoyant deal environment’ forecast to continue this year

When Dubai-based headhunter Dulsco acquired Scottish energy personnel specialist Advance Global Recruitment this week, it was the latest deal in a mergers and acquisitions market that analysts say is growing at an “unprecedented” rate.

The EY Middle East and North Africa M&A Insights 2022 report found that the Mena region – which historically records 500-600 deals a year – racked up 754 deals in 2022.

This is a 13 percent rise on the 661 deals the previous year, although the total value of the deals dipped from $99 billion in 2021 to $82.5 billion.

“M&A activity in the Middle East reached new heights last year,” said EY Mena strategy and transactions leader Brad Watson, “testifying to the success of companies adjusting their M&A strategies to the needs of the changing market.”

The surge in M&A activity was driven by a boost in investor confidence, which in turn was attributed to high oil prices improving conditions, business-friendly reforms and the easing of travel restrictions, according to the report.

George Traub, managing partner of Lumina Capital Advisers, which acted as lead financial adviser in the Dulsco deal, said it continued to see significant mergers and acquisitions activity in the energy and related sectors between the Middle East and the UK, "supported by bilateral trade and investment initiatives".

He added that the Dubai company's purchase of Advance Global Recruitment, which has offices in Scotland and the UAE and clients across 70 countries, exemplifies the rise in deals driven by two-way capital flows as multinationals and funds seek access and investments in the region. 

Domestic deals represented 51 percent of the total volume and 34 percent of the value, according to the EY report. Outbound deals led in value with $40.1 billion. There were also 165 inbound deals.

In terms of sectors, technology made up 25 percent of the total deal volume as the region – and the GCC in particular – seeks to position itself as a hub for tech startups.

Government-related entities such as sovereign wealth funds were involved in 137 of the deals in 2022. This figure was 78 percent up on 2021 and the highest number since 2017. 

The UAE topped the lists of target countries and bidder countries by value last year, followed in both rankings by Saudi Arabia. Egypt and Oman also made an appearance in the top five Mena target and bidder countries.

The US had the highest number of Mena deals at 35. Of these, 19 were in the technology sector.

“Domestic deals were a significant driver of deal volume in the region," said EY's Watson. "The number of inbound deals in the UAE indicates that non-Mena investors are showing significant interest in the conducive business environment.”

The UAE registered three of the region’s largest M&As, led by Canada's Caisse de Dépôt et Placement du Québec, acquiring a 22 percent stake in each of DP World’s entities – the Jebel Ali Free Zone, National Industries Park and Jebel Ali Port companies – for $5 billion. 

Anil Menon, EY Mena's head of M&A and equity capital markets, said: “The macro-economic challenges in the US and Europe have triggered a retreat of capital to the Mena region, with government-related entities and regional strategics leading the pack.

“Large cap players are super-active and hunting. The unprecedented volume of deal activity in 2022 is a clear reflection of an exceptionally buoyant deal environment, which we expect will continue in 2023.”

In January, law firm Norton Rose Fulbright predicted that M&A activity in the Gulf would be driven by the energy, infrastructure, healthcare and technology sectors.

Norton Rose Fulbright partner Zubair Mir and counsel Shazi Askarpour said in a research report that merger activity in 2022 was fuelled by sovereign wealth fund and government-related entity investments – “with neither showing any signs of slowing down”. 

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