Bank of America forecasts increase in Middle East M&A deals

Bank of America, the second-largest US lender by assets, expects mergers and acquisitions in the Middle East to increase as cash-rich global companies target investments in the region.

The trend is a shift from previous years when activity was mostly limited to sovereign wealth funds and government-related entities targeting overseas deals, Wadih Boueiz, the co-head of corporate and investment banking for the Middle East and North Africa said in an interview this week. The Charlotte, North Carolina-based bank is working on several deals that involve international investors looking at acquisitions in the Middle East, according to Mr Boueiz, who also leads the bank’s sovereign wealth fund business in the Mena region.

“If you are a strategic investor trying to access emerging markets and the Middle East in particular, it’s a good time to be buying,” Mr Boueiz said. “M&A in the region is not limited to wealth funds and state entities investing in cross-border situations.”

A revival in economic growth and improving financial markets are luring international investors to the region. Philips, the Dutch electronics manufacturer, last month agreed to buy a stake in Saudi Arabia’s General Lighting. Warburg Pincus bought a majority stake in a Dubai aviation software company owned by Emirates’ Dnata unit this month, the US private equity firm’s first investment in the Middle East.

The Gulf region’s sovereign wealth funds, which together control more than US$1 trillion in investments globally, are finding it more “challenging” to deploy capital while interest rates are low and liquidity in international markets increases, Mr Boueiz said.

The funds, historically heavy on European investments, are diversifying geographically and by asset class, according to Mr Boueiz.

“After a while, there is only so much real estate or stakes in banks or retail that one can add to its portfolio,” he said. “We expect them to continue looking at the US and also seek opportunities in Asia.”

The Abu Dhabi Investment Authority (ADIA), among the world’s largest sovereign wealth funds, targets investing between 35 per cent and 50 per cent of its portfolio in the US, according to its annual report for 2012. Qatar Holding, the direct investment arm of the Persian Gulf nation’s wealth fund, was part of a group of investors that agreed to buy a 50 per cent stake in a business-travel division of American Express for $900 million last month.

Bank of America ranked second among banks advising on acquisitions in Middle East and Africa this year, up from 16th for the same period in 2013, according to data compiled by Bloomberg News. BofA advised Commercial Bank of Qatar in its acquisition of Turkey’s Alternatifbank for $472m in December last year.