Mergers bloom in Mena with deals worth $26bn

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• Dubai’s Floranow buys Bloomax in Saudi Arabia
• UAE has highest merger activity in Mena followed by Saudi
• Value of deals increased but volumes dropped 

The acquisition by Floranow, an online florist based in the UAE, of Bloomax, the largest wholesale distributor of fresh-cut flowers in Saudi Arabia, is among the latest mergers in the Mena region.

The deal, announced on Monday, is funded by a combination of debt and equity and makes Floranow the largest importer and distributor of flowers in the kingdom.

The cut-flower industry in the Middle East, North Africa and Turkey is worth over $1.1 billion, with the Saudi market, the largest in the GCC, forecast to grow at 6 percent annually. 

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Mena enjoyed a 42 percent increase in mergers in the first three months of 2023 compared to the same period last year.

EY’s Mena Insights report, which came out last week, revealed 165 deals worth $25.8 billion in Q1, building on a buoyant 2022 when investment banking fees were generated to the value of $1.6 billion.

This was led by HSBC with a 7.5 percent slice ($120 million) of the pie. 

Advisory fees earned from completed M&A transactions totalled $510 million, a 35 percent increase compared to the previous year.

The UAE registered the highest activity in terms of both volume and value, registering 42 deals worth $2 billion, followed by Saudi Arabia, Kuwait, Egypt and Oman.

While the value of mergers increased significantly, indicating robust capital market confidence, the region witnessed a drop in deal volumes by 20 percent compared to the same period in 2022. 

Bloomax

EY analysis suggests the decline was driven by declining oil prices, lower real GDP per capita growth rates and rising food inflation.

Domestic deals were the main driver of M&As, the report says, contributing 43 percent and 15 percent of the overall deal volume and value respectively. 

Mena-based buyers are also thought to be seizing cheaper valuation opportunities during a period of global economic uncertainty as outbound transactions remained strong, accounting for 34 percent and 76 percent of the total volume and value.

M&A activity involving private equity or sovereign wealth funds represented 32 and 68 percent of the total deal volume and value, the EY data showed.

“The global economy is moving through a period of protracted uncertainty, which has resulted in a marked slowdown in overall deal volumes,” Brad Watson, EY Mena strategy and transactions leader, said.

“However, total values surged despite the pressures of rising interest rates, declining oil prices and soaring global inflation.” 

He said a significant portion of this growth came from sovereign funds, such as Saudi’s Public Investment Fund and Abu Dhabi’s Mubadala, while the technology sector led the domestic market segment, with 19 deals worth a total of $461 million in disclosed value. 

“Continued diffusion of technology across industries, more reasonable valuations, and growing adoption of fintech and e-commerce have all catalysed greater interest in the regional digital economy,” Anil Menon, EY Mena head of M&A, said.

The number of inbound deals dropped in the first quarter to 39, with a disclosed value of $2.4 billion, compared to 44 transactions worth $3.4 billion in Q1 2022. 

The UAE remained the favoured investment destination, although the total number of deals in the country fell from 22 to 16. 

France was the top bidder by both value and volume, with $1.6 billion spread across seven deals, followed by Hong Kong, China, India and Malta.

There were 55 outbound deals in Mena during Q1, amounting to $19.6 billion, compared to 56 mergers totalling $8.4 billion a year ago – with the UAE remaining the highest bidder by volume and value.