Deal value in Mena rises 105% in third quarter

Muscat: The value of announced deals with disclosed value in the Middle East and North Africa (Mena) region increased by 105 per cent to US$10.0 billion in the third quarter of 2018 from US$4.9 billion in the third quarter of 2017, according to the EY Q3 Mena Mergers and acquisitions (M&A) report.
Deal value remained consistent year-on-year; 107 deals were announced in the third quarter this year compared with 110 deals in the third quarter of 2017, a decrease of 3 per cent.
The Gulf Cooperation Council (GCC) deals represented 79 per cent (US$7.9 billion) of the total Mena announced deal value, and 73 per cent of deal volume (78 GCC announced M&A deals).
While announced cross border (inbound and outbound) activity was on par with in the third quarter of 2017, deal value increased fivefold, valued at US$9 billion in the third quarter of 2018 compared to US$1.5 billion in the third quarter of 2017. Outbound deals increased from US$1.5 billion in the third quarter of 2017 to US6.4 billion in the third quarter of 2018 and inbound deals grew from US$28.6 million to US$2.6 billion in the third quarter of 2018.
The third quarter of 2018 witnessed significant cross border activity from sovereign wealth funds with deal value of US$2.5 billion compared to US$0.3 billion in the third quarter of 2017 across sectors. In contrast, domestic deals dropped from US$3.3 billion in the third quarter of 2017 to US$1.0 billion in the third quarter of 2018 due to the focus strategic players on cross border transactions. The number of high-ticket deals increased significantly in the third quarter of 2018; eight deals valued at over US$500 million were announced in the third quarter of 2018, compared to two in the third quarter of 2017, leading to an overall increase in average deal size. This is largely attributable to the increased participation of sovereign wealth funds and significant activity in Oil and Gas and Chemicals sectors in the third quarter of 2018.
The acquisition of Arlanxeo Holding, a chemicals company in the Netherlands, for US$1.6 billion by Saudi Aramco was the largest deal of the third quarter of 2018.
“Companies in Mena are still following a cautious approach to deal making due to a modest growth in revenues and a drop in liquidity position, driven largely by ongoing regional market uncertainties, similar to last year. While deal values are higher than 2017, the results of the latest EY Capital Confidence Barometer (CCB) show that one-third (33 per cent) 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,” Phil Gandier, MENA Transaction Advisory Services Leader, EY.
The top five target sectors in Mena by deal value were (in order of value): oil and gas (US$1.4 billion), chemicals (US$0.5 billion), diversified industrial products (US$0.3 billiobn), real estate (US$0.3 billion), and consumer products (US$0.3 billion).
Prominent Mena players involved in more than two acquisitions during the third quarter of 2018 include: Investcorp, Investment Corporation of Dubai, Public Investment Fund, Amanat Holdings and Dnata.
According to the latest EY CCB, three-quarters of Mena respondents say they are actively reviewing their portfolios every six months or more to capitalize on disruptive forces impacting their businesses. Additionally, 71% have identified underperforming assets and non-core assets to divest.