The value of disclosed inbound mergers and acquisitions deals increased by 108 per cent in the Middle East and North Africa (MENA) region for the first six months of this year. The value of deals increased from $5.1 billion in H1 2012 to 10.6bn in H1 2013, according to Ernst &Young’s MENA M&A update. Outbound deal value dropped by 37 per cent from $10.5bn in H1 2012 to $6.6bn in H1 2013 and domestic deal value decreased by 13 per cent. Phil Gandier, MENA Head of Transaction Advisory Services, E&Y says, “Seeing the value of inbound deals double since H1 2012 is an interesting trend, as both inbound and outbound deal flows have seen a reversal compared to a year ago, where outbound deal value was nearly double the value of inbound deals. The UAE continues to play a key role in attracting investment to the region being the target country focus of 25% of inbound deal volume for H1 2013. This overall positive improvement of inbound investment could signify a continued level of confidence in the MENA market irrespective of the continued political uncertainty in the region.” Egypt saw the largest inbound deal value, representing 83% of all inbound deal value in H1, and has been the target country of two significant announced deals totaling US$8.3b in the telecommunication and construction sectors.The majority of inbound deal value went to the telecommunications sector mainly due to the proposed acquisition of a large parcel of shares in Egypt’s Orascom Telecom Holding by Baskindale Limited for US$6.4b. This offer was subsequently withdrawn but had it completed, it would have been the largest deal in H1 2013. The largest volume of domestic deals was in the UAE, representing 25% of domestic deals in H1 2013, followed by Saudi Arabia representing 19% of domestic deal volume in MENA. In Q2 2013, the value of disclosed deals dropped by 43% from US$14.3b in Q2 2012 to US$8.1b.
However, announced deal volume increased by 20% from 92 deals in Q2 2012 to 110 deals in Q2 2013, the highest Q2 M&A activity since 2008. In the first half of this year, disclosed deal value rose from US$21.6b in H1 2012 to US$22.3b, an increase of 3%. In H1 2013, 206 deals were announced as compared to 193 deals in H1 2012, an increase of 7%. “Both the volume and value of inbound and outbound deals between US$100m and US$500m have increased during the first half of this year compared to H1 2012. Coupled with a decrease in the number of deals less than US$100m, this is a healthy improvement for the MENA M&A market whereby larger deal values signify an improving capital market which we may see continue over the remainder of the year,” said Phil.
However, announced deal volume increased by 20% from 92 deals in Q2 2012 to 110 deals in Q2 2013, the highest Q2 M&A activity since 2008. In the first half of this year, disclosed deal value rose from US$21.6b in H1 2012 to US$22.3b, an increase of 3%. In H1 2013, 206 deals were announced as compared to 193 deals in H1 2012, an increase of 7%. “Both the volume and value of inbound and outbound deals between US$100m and US$500m have increased during the first half of this year compared to H1 2012. Coupled with a decrease in the number of deals less than US$100m, this is a healthy improvement for the MENA M&A market whereby larger deal values signify an improving capital market which we may see continue over the remainder of the year,” said Phil.
Top 10 announced deals in H1 2013 by value
Four of the top 10 announced deals by value in H1 2013 were announced acquisitions by companies in Qatar. The top announced deal in H1 2013 was Baskindale Limited’s acquisition of Orascom Telecom Holding in Egypt for US$6.4b, followed by the acquisition by Sorouh Real Estate PJSC in the UAE of Aldar Properties PJSC for US$2.0b, Netherlands based OCI N.V acquisition of Orascom Construction Industries in Egypt for US$1.9b and Qatar Foundation QSC acquisition of Bharti Airtel Ltd’s in India for US$1.3b.
MENA PE/SWF Activity
Out of 206 announced deals in H1 2013, 39 comprised SWF/PE deals (19% of all announced deals). The 39 SWF/PE deals comprised US$4.2b of total announced value in H1 2013. The largest SWF deal was the acquisition of Bharti Airtel Ltd in India by Qatar Foundation QSC for US$1.3b. The majority of SWF/PE activity was in the telecommunications sector. ”SWFs have historically preferred to invest in outbound deals, however in the first half of this year, 44% of SWF/PE deals were domestic deals compared to 41% outbound deals, showing a more balanced distribution between domestic and outbound deals. It will be interesting to see if this trend continues in the future as MENA countries look within themselves for investment opportunities,” said Phil.
