JEDDAH – The deal value of mergers & acquisitions (M&A) in the Middle East and North Africa (MENA) region grew by 42 percent in 2012 to reach $44.8 billion, compared to $31.6 billion in the preceding previous year, said Ernst and Young in its 2012 year-end MENA M&A update. However, the volume fell by 4 percent from 416 in 2011 to 398 in 2012, the report noted. The fourth quarter saw significantly higher deal values yet lower deal activity in 2012 compared to the same period in 2011, it added. The UAE and Qatar led the regional deal activity in 2012, it said. From an acquirer's perspective, countries that ranked highest in terms of announced deal value were the UAE at $13.5 billion, followed by Qatar at $11.2 billion and Kuwait with $3.9 billion. Of the top 10 announced deals by value in MENA in 2012, four of the deals were acquired by Qatar and three of the deals were acquired by the UAE. The countries that saw the largest number of announced acquisitions in 2012 were the UAE (77 deals), Qatar (48 deals), and Saudi Arabia (33 deals). The report further said the announced deal values increased by 84 percent from $7.2 billion in the fourth quarter of 2011 to $13.3 billion last year. However, the deal volumes in fourth quarter dropped 17 percent to 107 deals from 129 deals during the same period last year. In comparison to the previous quarter, total announced deal values rose 35 percent to $13.3 billion in Q4 from $9.9 billion in the third quarter. Phil Gandier, MENA head of Transaction Advisory Services, E&Y, said "the 42 percent increase in announced deal values in 2012 suggest that there may be an improvement in the valuation gap among buyer and sellers in the market in comparison to last year where total deal values were considerably lower." "Additionally, many businesses who restructured their capital back in 2011 left themselves well placed to finance and close deals in 2012. As 2013 unfolds there is an anticipation that the improvement in deal activity in 2012 will further improve as we start to see market conditions continually improving despite the unpredictable macroeconomic landscape,” he added. In the domestic front, Egypt and the UAE saw the highest activity in terms of target country focus of announced domestic deals, with 36 and 33 deals respectively in 2012. The countries with the highest deal values for target country focus of announced domestic deals in MENA were Kuwait at $4.9 billion and Egypt at $3.4 billion. In terms of value, the outbound deals held the greatest value among total announced deals, comprising $19.4 billion, 43 per cent of total announced deal value in 2012, compared to $15.6 billion for domestic deals and $9.9 billion for inbound deals. The domestic transactions outnumbered inbound and outbound deal activity, comprising 48 percent of total deals in 2012, it added. The total inbound announced deal value saw the largest improvement compared to 2011, increasing by 77 per cent from $5.6 billion in 2011 to $9.9 billion in 2012. Announced domestic deal values also saw a significant rise of 60 percent compared to 2011 despite the decline in announced domestic deal volumes from 224 in 2011 to 190 in 2012. “The increase that we've seen in deal values across all types of deals in 2012; particularly inbound deals when compared to 2011 highlights that the Mena markets still continue to remain attractive to global investors and institutions as they look to emerging markets as attractive regions for growth," said Ghandier. Oil & gas, professional firms & services and consumer products sectors were the most active in terms of the number of announced inbound deals. In terms of value, telecoms led the inbound deals at $3.3 billion due to the sole transaction of France Telecom SA buying the Egyptian Company for Mobile Services. The sectors that attracted the most domestic M&A activity in 2012 in terms of volume included real estate, asset management, and consumer products. Banking & capital markets had the highest value of domestic M&A deals at $5.2 billion, followed by telecom sector at $4.1 billion, E&Y said in the report. “A few deals have been completed in the telecommunications, oil & gas and banking & capital markets sectors which are characteristically high in value. These big ticket deals are a promising sign that markets are developing and picking up pace,” Ghandier further said. Of the 398 deals announced in the region, 71 deals were in the sovereign wealth fund/private equity space, an increase of 54 per cent from the 46 deals in 2011. The 71 deals comprised $13.3 billion of the total announced deal values in 2012. March saw the maximum activity in 2012 closing with 14 deals, the report added. Global M&A activity in 2012 is down on last year, with volume falling 12 percent compared to 2011, while the total value of deals fell by 8 per cent as macro-economic concerns, including the ongoing eurozone crisis and the impending “fiscal cliff” in the US, restricted corporates in the developed markets from committing to acquisitions. M&A activity is predicted to remain low in 2013, with the appetite to acquire among large global corporates falling, said the expert. “Acute caution was the prevailing M&A sentiment in 2012. The eurozone crisis continues to impact 9 global companies in every 10 and in 2012 we saw its impact reduce the appetite for M&A – even in many formerly deal-hungry emerging markets," remarked Pip McCrostie, Global vice chair, Transaction Advisory Services at E&Y. "Limited deal activity will likely continue through 2013, especially if we don't see a clear, long term resolution to the US fiscal cliff in the US," he added. — SG
