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Wed 24 Jul 2019 03:05 PM

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Revealed: the impact of Aramco, Uber on MENA's M&A landscape

MENA region sees 220% jump in merger and acquisition deals too $115bn during first six months of 2019

Revealed: the impact of Aramco, Uber on MENA's M&A landscape

Saudi Aramco's agreement to buy a 70 percent stake in SABIC for over $69 billion drove a 220 percent increase in the value of deals in the MENA region in the first half of 2019.

According to a report by EY, the region saw merger and acquisition deals worth $115.5 billion, up from $36 billion in H1 2018.

However, deal volume witnessed a decrease of 10.7 percent, with 216 announced deals in H1, down from 242 deals recorded in the year-earlier period.

In H1, state-owned entities were involved in 55 deals (25 percent of total deals) amounting to $104.5 billion, which represented 90 percent of the total deal value, including mega deals involving Saudi Aramco, ADNOC and ADIA.

Matthew Benson, MENA transaction advisory services leader, EY, said: “MENA corporates are finding innovative ways to raise capital and have stepped up the frequency of their portfolio reviews... With more frequent portfolio reviews, several non-core businesses are set aside for divestment thereby fueling deal activity."

He added: "Looking ahead, we expect MENA companies to continue to reshape their portfolios to remain resilient to potential headwinds on the horizon, even as they actively pursue their ambitious growth objectives.”

In H1, the chemicals sector had the highest deal value due to the landmark Saudi Aramco–SABIC deal, followed by the oil and gas sector while the technology sector also logged a deal value of $4.3 billion, which included Uber’s $3.1 billion acquisition of Careem Networks.

Anil Menon, MENA M&A and equity capital markets leader, EY, said: “MENA executives are relatively more optimistic about the improving economic prospects while still keeping an eye on evolving geopolitical risks. MENA executives are proactively pursuing strategic options to strengthen competitive advantage and accelerate growth in an era where technology continues to disrupt traditional business models.”

The first six months of 2019 also saw an increase in domestic M&A activity in terms of deal value, with 111 deals amounting to $79.3 billion, compared to 96 deals amounting to $5.5 billion in H1 2018.

In addition, MENA witnessed 65 outbound M&A deals amounting to $21 billion compared to 77 deals amounting to $18.2 billion a year ago.

The EY report said the UAE was ranked the highest in terms of inbound M&A investment in the region, with 20 deals amounting to $14.4 billion.

“The large sums of inbound M&A reinforces the MENA investment thesis. We continue to believe that these are good times for strategic acquisitions in MENA,” added Menon.

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