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Reforms draw North American investors to the Gulf

DP World
Caisse de Depot et Placement du Quebec, in partnership with DP World, signed a $5 billion deal to acquire stakes in Jebel Ali Free Zone, National Industries Park and Jebel Ali Port
  • US and Canadian firms focus on technology-related investments
  • UAE saw 105 deals, Egypt 65, Saudi Arabia 39 and Morocco 18 

North America-based entities were the most active investors in Middle East and North Africa merger and acquisition (M&A) deals in the first half of 2022.

Attracted by ongoing economic reforms in the region, US and Canadian firms took part in 30 percent of inbound M&A activity, with a particular focus on technology-related investments.

The latest EY MENA M&A Insights report, released today, shows that activity was largely driven by the $5 billion deal signed in June by Caisse de Depot et Placement du Quebec in partnership with DP World. This was to acquire a 22 percent stake in Jebel Ali Free Zone, a 22 percent stake in National Industries Park and a 22 percent stake in Jebel Ali Port.

Emmanuel Jaclot, executive vice-president and head of infrastructure at CDPQ, said at the time that the investment in Jebel Ali was one that will “play a pivotal role in the evolution of the global economy”.

Rising energy prices, implementation of business-friendly reforms in the region and the easing of government travel restrictions resulted in higher inbound deal volume in the MENA region.

There were 94 inbound deals, worth $9.8 billion, compared to 62 in the same period the previous year.

The UAE continued to be the favoured inbound investment destination, with 51 inbound deals worth $7.4 billion during the first half of 2022. This was bolstered by the reforms aimed at strengthening its business environment, attracting foreign investment and incentivising companies to set up or expand their operations.

Egypt also emerged as another major investment destination, with activity surging threefold in the first six months of 2022 year-on-year. This was mainly led by favourable government initiatives, including granting a special licence to foreign investors.

“Despite the global economic uncertainty, we are continuing to witness a positive trajectory in mergers and acquisitions activity across the MENA region as economic diversification initiated by governments continues to buoy interest in strategic transactions,” Brad Watson, EY MENA strategy and transactions leader, said.

“Fiscal reforms, particularly in the UAE and Saudi Arabia, aimed at strengthening cooperation between the public and private sector, are increasing the appetite of investors, while government-led initiatives across the board are supporting the region’s burgeoning start-up ecosystem that further increase deal activity.”

Overall, the MENA region recorded 359 M&A deals worth $42.6 billion during the first six months of 2022, up 12 percent annually.

The UAE led the top five target countries across the region, with 105 deals signed worth $14.2 billion. This was followed by Egypt with 65 worth $3.2 billion, Saudi Arabia with 39 worth $2.8 billion, Morocco with 18 worth $1.8 billion and Oman, with 10 worth $700 million.

Target countryDeals signedValue ($)
UAE10514.2 billion
Egypt653.2 billion
Saudi Arabia392.8 billion
Morocco181.8 billion
Oman10700 million

The top five target subsectors in the MENA region by deal value were transportation, consumer products, telecommunications, real estate and power and utilities.

According to the report, domestic transactions contributed 48 percent and 33 percent of the total M&A deal volume and value respectively over the six-month period.

Activity was significantly driven by involvement of private equity or sovereign wealth funds, which accounted for 35 percent and 38 percent of the total volumes and values.

Overall, 173 domestic transactions were concluded worth $13.9 billion in the first six months of 2022, with three deals forming around 41 percent of the domestic M&A value.

The report also revealed that transactions involving government-related entities (GRE) saw a total value of $16.9 billion in the first half of 2022, accounting for 40 percent of total disclosed deal value.

GRE-led deals have declined from an average of 62 percent of value in past years, signalling an increased regional participation by the private sector.

Anil Menon, EY’s head of MENA mergers and acquisitions and equity capital markets, said: “The most interesting development is the reduced dependence on GRE-led deals.

“The private sector is leading the charge in dealmaking in MENA, which is reflective of the attractive fundamentals, abundant liquidity and re-rating of longer duration growth companies.”