The region saw 107 mergers and acquisitions valued at $10.0b take place in the third quarter alone
The value of announced deals with disclosed value in the MENA region have risen by 105% to $10 billion in Q3 2018 from $4.9b during the same time last year, despite the number of deals having dropped 3% from 110 in Q3 2017 to 107 this year, according to the Q3 MENA M&A report by global giant EY.
Deals in the GCC represented 79% ($7.9b) of the total deal value in MENA, and 73% of deal volume.
While cross border activity remained consistent with Q3 last year, deal value increased fivefold to $9b in Q3 this year compared to $1.5b in the same period last year.
Outbound deals increased from $1.5b in Q3 2017 to $6.4b in Q3 2018, while inbound deals grew from $28.6m to $2.6b during the same time.
This year’s third quarter saw significant cross border activity from sovereign wealth funds, with a deal value of $2.5b compared to $0.3b in Q3 2017 across sectors. In contrast, domestic deals dropped from $3.3b last year to $1.0b in Q3 2018.
Moreover, high-ticket deals valued at over $500m were announced in Q3 this year compared to two in Q3 last year, due to partly to high activity in the oil and gas and chemicals sectors. This include the acquisition of Netherlands-based chemicals company Arlanxeo Holding for $1.6b by Saudi Aramco. The deal was considered the largest of its kind in Q3 2018.
However, companies in MENA continue to follow a cautious approach to deal making as a result of modest revenue growth and a drop in liquidity, both driven by ongoing regional market uncertainties, according to Phil Gandier, MENA Transaction Advisory Services Leader at EY.
“While deal values are higher than 2017, the results of the latest EY Capital Confidence Barometer (CCB) show that one-third (33%) of MENA companies expect to pursue M&A in the next 12 months, a 32-percentage-point drop from a year ago. In the coming year we may see subdued deal activity and values,” he said.
The top five target sectors in MENA by deal value were oil and gas at $1.4b, chemicals at $0.5b, diversified industrial products at $0.3b, real estate at $0.3b and consumer products at $0.3b.