State of the deal: MEA posts $60bln worth of M&A transactions in first half

With 130 deals valued at $59.8 billion, M&A activity in the Middle East and Africa has largely been shielded from the global downturn in the opening half of 2020.

According to Mergermarket's "1H20 Global Report," the first-half deals include nine valued over the $1 billion mark, including two above $10 billion in the second quarter. The first half M&A performance has the second highest year to-date value on Mergermarket record, behind last year's $119.5 billion worth of transaction driven by the $70 billion Saudi Aramco/Sabic tie-up.

However, outbound M&A, dipped to its lowest year to date value since the global financial crisis over a decade ago to just $6.6 billion so far this year. This included investments into India-based Jio Platforms by Mubadala ($1.2 billion) and Abu Dhabi Investment Authority ($752 million) as well as the $1 billion acquisition of the Ritz Hotel in London.

Across the GCC, M&A activities are expected to increase amid the Covid-19 pandemic as small and medium enterprises and several large corporates will look for equity via capital injections to satisfy working capital needs, according to Ali Maabreh, head of M&A at KPMG in Saudi Arabia.

In the first quarter, the number of closed M&A (merger and acquisition) transactions in the GCC for the first quarter witnessed a 52 per cent decline when compared to the same period last year, while it fell 51per cent over the previous quarter, according to a report by Kuwait Financial Centre.

"The second quarter saw a consortium of investors led by Global Infrastructure Partners acquire a 49 per cent stake in Adnoc's gas pipeline assets for $10.1 billion, announced in June. Volatility in the markets means that the deal represents a safer investment into a more insulated part of the value chain, while allowing Adnoc to continue its divestment strategy in order to open capital and reinvest," Mergermarket said in its report.

With 15 deals, M&A in the energy, mining & utilities sector reached $ 32.1 billion in the first half of the year, surpassing all annual totals the sector has seen in the region.

"The big-ticket deals in the first half have already pushed this year's value 14.8 per cent ahead of the full-year 2019 figure of $28 billion (62 deals), the previous annual record. The sector represents a 53.7 per cent of MEA's year to-date value this year, up from 19.6 per cent in 2019," said the report.

The technology sector has remained active in MEA despite the uncertainty, mirroring trends in global deal-making. The sector saw 27 deals worth a combined $2.5 billion, contributing 21.1 per cent in the region's first half deal count, an increase from 17.6 per cent in 2019.

The pharma, medical & biotech sector has seen its share of the MEA region's overall deal count rise to 10.9 per cent in 2020, with 14 deals worth a combined $579 million.

"Despite the added difficulties in conducting cross-border deals, foreign investment into the region remained strong in the second quarter, reaching $16.3 billion (31 deals) in the second quarter - the largest quarterly value since first quarter 2017 at $2 billion," said the report.