DUBAI, UAE — The year 2023 is unlikely to experience a slowdown, and rather, the corporate/M&A activity in the region may well see an uptick, a market expert told TRENDS.
The Sovereign Wealth activity, especially in Abu Dhabi and Saudi Arabia, has reached unprecedented levels, creating a considerable ripple effect across the GCC, added Fraser Dawson, CFA, Partner at Corporate Finance, Addleshaw Goddard.
The year 2022 defied the declining corporate/M&A activity trend observed in most other jurisdictions, said Dawson, echoing the latest Ernst & Young’s report that pointed out a 13 percent increase in the number of M&A transactions in MENA last year, reaching 754 deals.
Factors such as higher oil prices, investor-friendly reforms, and governments easing COVID-related travel restrictions contributed to the “unprecedented” M&A activity in the MENA region, as stated in the MENA M&A Insights 2022 study.
UAE leads the region
The United Arab Emirates (UAE) hosted three of the region’s largest M&A deals, including the Canadian fund Caisse de Depot et Placement du Quebec’s $5 billion acquisition of a 22 percent stake in three DP World properties based in Dubai.
In May, Abu Dhabi-based telecommunications company e& acquired a 9.8 percent stake in the UK’s Vodafone Group for US$ 4.4 billion.
The third-largest deal featured in E&Y’s report was Adnoc’s US$ 4.1 billion purchase of a 24.9 percent stake in OMV from Mubadala Investment Company.
With economies rebounding rapidly from the coronavirus-induced recession and high oil prices bolstering liquidity, M&A activity has intensified in the UAE, the Arab world’s second-largest economy, and the broader GCC region.
Other regional countries
According to EY’s study, the UAE ranked first among M&A target countries and bidder nations by value in 2017.
The report highlights the proposed acquisition of a 51 percent stake in STC’s telecom towers company Tawal by the Public Investment Fund, driven by Saudi Arabia’s Vision 2030, which aims to diversify the economy away from oil.
In a separate “strategic transaction in the oil and gas sector,” Saudi Aramco acquired the global products division of US-based vehicle oil and lubricant manufacturer Valvoline for US$ 2.7 billion.
The M&A study also revealed that Egypt and Oman have joined the top five ranks of MENA target and bidder countries.
Looking back
Discussing the corporate/M&A activity trend in the region, Dawson cited the dual listing of Americana on the Saudi Tadawul and Abu Dhabi Securities Exchange as an example of increased capital market activity in the region.
Addleshaw Goddard represented Yum! in this transaction, which is Americana’s largest franchisor for KFC and Pizza Hut brands.
Several significant initial public offerings (IPOs) in the region, driven by sovereign sellers, followed suit.
The populations of key GCC cities, such as Dubai and Riyadh, continue to grow rapidly, resulting in increased demand for goods and services related to corporate/M&A opportunities, he added.
Saudi Arabia’s significance
Saudi Arabia represents a significant market in the GCC for Addleshaw Goddard. Dawson anticipates that the kingdom will drive growth in the region for the next decade.
Factors propelling this growth include:
Demographics (a young, well-educated, and motivated population)
Sovereign investment (e.g., the giga-projects in Saudi Arabia)
The liberalizing of markets/modernizing of legal systems in the kingdom “Saudi Arabia will be one of the most talked-about and focused upon countries in the next decade, including business, leisure, and tourism activities. The scale of the ambition and vision for Saudi at this point is unparalleled globally compared to any other country,” said Dawson.