Mena merger and acquisitions value drops 27% in first quarter, EY says

The value of mergers and acquisitions deals in the Middle East and North Africa tumbled 26.7 per cent in the first quarter of 2018 as companies look to preserve capital amid market volatility, according to professional services firm EY.

“Confidence in the economy remains strong, though MENA companies are taking a pause as rising inflation, market volatility, and high deal valuations have businesses looking to preserve capital rather than deploy it in the short term,” said Phil Gandier, EY’s transaction advisory services leader for Mena.

The total disclosed deal volume in the first three months of the year fell to $15.4 billion from $21bn in the same quarter of 2017, according to EY’s latest quarterly M&A report published on Wednesday.

The UAE saw the highest transaction value totalling $5.1bn from 23 deals announced in the first quarter, while the oil and gas sector in Mena dominated the list of disclosed deals over the period, totalling $7.2bn.

This was followed by the chemicals sector with a deal value of $2.5bn, insurance with $1.2bn, then provider care and technology with $1bn each.

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Middle East M&A deal volume declines in first half of 2017

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“Although deal volume has been modest in the first quarter of 2018, deal values relating to acquisition capital deployed in Mena in the quarter have reached their highest levels since 2001, with $10.2bn invested in the region. The insurance, medical and education sectors have seen the highest allocation of acquisition capital,” said Mr Gandier.

Of the announced M&A deals in Mena, 27 were inbound deals, up 42.1 per cent from 19 inbound deals in the year-earlier period. Inbound deal value increased by 138.7 per cent to $7.4bn, according to the report.

However, the number of outbound M&A deals fell to 29, from 41 in the first quarter of 2017, and the total deal value fell by 63.8 per cent. The Mena region also saw a decline in domestic deals, with 37 announced compared to 59 in the first quarter of 2017.

“Companies in Saudi Arabia and Egypt particularly are taking a wait-and-see approach,” Mr Gandier said. “Last year, UAE companies dominated inbound and outbound M&A activity and we expect the UAE to continue driving deals in 2018.”

At the same time, executives in the region are feeling optimistic about the local economy, with 98 per cent saying they see it as improving or stable, according to the latest EY Capital Confidence Barometer, published this week.