Finance

Mena targets US as outbound M&A deals jump 53%

August 31, 2023, 1:05 PM

PIF dividends — Dividends from the companies it has invested in are helping to boost the income of Saudi Arabia's Public Investment Fund

$30.6bn of deals agreed
US was top target country
PIF and Adia among top dealmakers

Entities from the Middle East and North Africa agreed deals to purchase companies outside the region worth almost $31 billion in the first half of 2023 as cash-rich sovereign wealth funds and other government-related bodies shrugged off rising interest rates to expand their foreign portfolios.

The outbound M&A total deal value was $30.6 billion, up from $19.6 billion a year earlier, while the number of such acquisitions rose by one-tenth over the same period, according to a report by consultants EY.

The United States was the top target for Mena buyers, who agreed 20 deals for US companies worth $22.2 billion.

Regional entities also agreed to acquire five Chinese companies for an aggregate $3.9 billion and seven Indian companies for a total of $700 million.

Gulf sovereign wealth funds (SWFs) were among the leading dealmakers, especially Abu Dhabi Investment Authority (Adia) and Saudi Arabia’s Public Investment Fund (PIF).

The biggest deal was the Adia-led purchase of US chemicals manufacturer Univar Inc for just over $8 billion.

Second was PIF subsidiary Savvy Games Group’s agreement to buy US video game developer Scopely for almost $5 billion, while another Adia consortium also landed Mena’s third-largest acquisition – of US tech firm Cvent Holding Corp for $3.5 billion.

The top inbound deal – the acquisition of a Mena company by an entity from outside the region – was Canada’s Brookfield Asset Management to buy UAE payments provider Network International Holdings for $2.6 billion.

Overall, Mena entities were involved in 318 new M&A deals in the first six months of 2023. This was down 14 percent year on year although the combined sales value declined only 0.4 percent to just under $44 billion.

The EY report attributes the slight slowdown in activity to a “dampened” economic outlook and recession fears, high interest rates and inflation, and geopolitical tensions.

“Dealmakers seemed to be adopting a cautious approach given the uncertain market conditions,” the report states.

By sector, technology was the top target, accounting for $15 billion of the total deal value, and $11 billion of outbound deals, followed by chemicals ($12 billion both total and outbound).

“Investor interest [in the former] focused mainly on cybersecurity, cloud computing, fintech and ecommerce, clearly indicating the segments that are poised to shape the future of the industry,” said Anil Menon, EY Mena head of M&A and equity capital markets.

The UAE was the top destination for acquisitions, with 82 deals worth a combined $6 billion, followed by Saudi Arabia’s 43 deals that had an aggregate value of more than $3 billion.

The same two countries also ranked first and second in the list of top bidders.

UAE buyers agreed 115 deals totalling $20 billion, while Saudi Arabian entities’ 53 acquisitions will be worth close to $15 billion once completed.

The number of domestic M&A deals in Mena fell 24 percent year on year to 138. The value of such deals fell 53 percent over the same period to $14 billion, EY data shows.