Global law firm Baker McKenzie has observed that the merger and acquisition transaction prices and volumes have seen a year-on-year drop by about 58% and 26% respectively in the first half of 2020 in the Middle East, following an improvement in May and June.
According to the latest study by the law firm, the regional drop in M&A (mergers and acquisition) deals are in line with the fall in the global activity that saw overall deal values drop by 41% from H1 2019 in the first six months.
Over the past two years, Abu Dhabi has been leading the MENA region in bringing over more foreign investors to some of its valuable assets, according to a Bloomberg report. Abu Dhabi National Oil Company, the state-owned energy producer of the emirate raised $10 billion by selling a stake in its natural gas pipelines to a group of investors including Global Infrastructure Partners and Singapore’s sovereign wealth fund.
After embarking on a transformation plan, ADNOC has sold shares in its distribution unit and ushered foreign investors into its refining and oil-field servicing arms. KKR & Co and BlackRock Inc decided last year to invest $4 billion in ADNOC’s oil pipelines.
Sovereign wealth funds, including the Public Investment Fund of Saudi Arabia, are spending billions of dollars to purchase stakes in companies ranging from Facebook to Citigroup to take advantage of a price slump.
As for volume, with just 196 sales, Middle East M&A saw a decrease in volume during the first half of 2020. Given the global COVID-19 pandemic, the fall is due to uncertainty in markets across the world.
Omar Momany, Partner and Head, Corporate M&A, Baker McKenzie Habib Al Mulla.
“COVID-19 has had a significant impact on M&As across the region. However, as the world begins to emerge from the pandemic, we can expect markets to begin to bounce back leading to more opportunities for investment, distressed M&As and consolidation within the region.”
The US remained the top target in cross-border deal-making and acquiring countries by value while Hong Kong is the top Asian acquirer based on deal value. As for numbers, India was the top target country with 10 deals followed by the US with eight deals, and then the United Kingdom with 4 deals.
Energy & Power is the sector that received the highest deals by value, with four deals estimated at $10.1 billion in H1 2020, substantially higher than High Technology’s value, which ranked first in volume with nine deals worth $193 million.
In terms of volume, the industrials (shares in industries) lead the merger and acquisition numbers with 16 deals and is followed by the real estate sector which had 12 deals. In terms of value, it is the telecommunication industry that leads in the H1 2020.
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