MENA executives continue to be cautiously optimistic about future M&A

An EY survey suggests that though worried about the economic conditions, 62% of them continue to have a positive outlook.

By Rahul Vaimal, Associate Editor
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Middle East
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According to a survey report from EY, 62% of MENA executives remain optimistic that the global Mergers & Acquisition market will improve in the next 12 months even though the overall M&A sentiment has decreased and percentages are lower than in the first half of 2019.

“The COVID-19 is a great reset that will provide amazing acquisition opportunities. Sovereigns, large merchant families and corporations are aggressively looking at tactical buying opportunities,” said Anil Menon, MENA M&A and Equity Capital Markets Leader, EY.

The EY Global Capital Confidence Barometer inferred that as expected, business executives in the Middle East region are unsure and wary about the economy, their growth opportunities and their potential for M&A in general.

Of the executives polled, 77% expect the COVID-19 pandemic to have a major impact on the global economy, while 25% claim that it would have a small effect on the local economy.

Even so, some of the executives have decided to remain cautiously optimistic as the effect of the pandemic can vary across sectors and regions. In the immediate future, a slowdown is expected in the general M&A activities as the companies will focus on shoring up liquidity, driving cost efficiencies and preserving value.

“However, the pandemic and lower oil prices are expected to accelerate consolidation across sectors and sale of non-core businesses held by merchant families,” says the report.

54% of MENA executives say they are preparing to aggressively seek M&A in the next 12 months, which is just marginally below six months earlier, according to the MENA companies surveyed. Also, 45% will use M&A to improve their competitiveness and recovery role by bolt-on acquisitions and 30% for disruptive transactions that could radically reshape their business.

80% of MENA executives say that their firms are already undergoing a remarkable technology and business disruption to meet the profitability targets and this improves the opportunities. The MENA region has been exhibiting the positive trend of achieving digitization rapidly.