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Mergers and acquisitions in the Middle East Q1 2020 amid the COVID-19 crisis

Following the recent updates and effects of COVID-19, it is observable that the Coronavirus pandemic has caused negative changes in most industries except for the Mergers and acquisitions industry.

According to Baker McKenzie’s report, the Mergers and acquisitions industry is still on a steady track in the Middle East.

 

What To Know About Baker McKenzie

Baker McKenzie Habib Al-Mulla is an international law firm in the UAE and it brings over 30 years’ local and global resources to its clients in the region. It includes a team of 60 lawyers that offer local and international legal advice in Arabic and English across both of its offices in Dubai and Abu Dhabi.

 

Merger and Acquisition Shows Stability in The Middle East

According to the international law firm Baker McKenzie, The first quarter in 2020 held some stability in the Mergers and acquisitions industry in the Middle East compared to the fourth quarter of 2019. M&A’s value increased by over 5 billion dollars and had 6 more deals.

Omar Momany who is Partner and Head of the Corporate and Commercial Practice Group at Baker McKenzie Habib Al Mulla said the following “It is evident that the current global situation has caused a slow down in the growth of M&A activity in the Middle East, but Q1 2020 seems to have benefited from last year’s momentum”

Given the recent economic environmental circumstances, Mamony stated that there are two scenarios for the M&A industry, he said “we can potentially expect two possible scenarios moving forward. The first is a further slow down in the M&A volumes and values in the next two and possible three quarters reflecting on the global uncertainty, investors’ anxiety, and shift of priorities.

The second scenario is that growth continues but at a much slower pace and value, similar to that of Q1 of the current year, driven by companies being interested to join forces in an attempt to mitigate losses and consolidate and driven by the availability of quality assets and targets available at a lower valuation”.

 

Merger and Acquisition Activity in The Middle East

The total M&A activity in the Middle East in the first 2020 quarter reached 9.3billion dollars due to 95 deals compared to the fourth quarter of 2019 where it was 4 billion dollars out of 89 deals.

The top five deals constitute around 80% of the total deal values with 7.4 billion dollars; the industries that had most value were Industrials with 1 billion dollars and High Technology with 190 million dollars.

The first quarter of 2020 witnessed an increase in the cross-border deal activity in the Middle East compared to the last quarter of 2019 as it increased 4.8 billion dollars with 63 deals from 3.6 billion dollars with 58 deals; while the domestic deal activity also witnessed an increase compared to the fourth quarter of 2019.

There’s also a slight increase in the value of deals as it went from 378 million dollars in the last quarter of 2019 to 4.44 billion dollars in the first quarter of 2020; this was achieved by Port & Free Zone World’s acquiring DP World with 2.71 billion dollars and by Qatar Petroleum acquiring Qatar Fertilizer with 1 billion dollars.

 

The Merger and Acquisition Inbound Cross-border Activity in The Middle East

The deals in the Middle East remained the same in the first quarter of 2020, while the total inbound deal values increased from 202 million dollars in the last quarter in 2019 to 1.19 billion dollars. The UAE is considered to be the most attractive destination for investments in value and volume. It has 16 deals which equals 1.1 billion dollars.

India had the most investments in the Middle East at the beginning of 2020; it acquired 7 deals which equals 130 million dollars. One of the top acquirer countries is the US with 1.06 billion with 4 deals which ranks it second in terms of volume.

The most targeted industry by volume is High Technology as it acquired 7 deals valued 190 million dollars while Industrials is the most target industry by value when Altavair acquired Etihad Airway’s commercial aircraft portfolio with 1 billion dollars.

Interregional Cross-Border Top 5 Deals By Value, Q1 2020 via Baker McKenzie

The Merger and Acquisition Outbound Cross-border Activity in The Middle East

The UAE had 11 outbound deals, which value around 352 million dollars, which makes it the most acquisitive country in the first quarter in 2020, the top acquirer country by value, and ranking second by volume, is Saudi Arabia with 2.6 billion with 9 deals.

In terms of volume, the US comes is the top target country with 12 deals that value 820 million dollars, Egypt comes second with 6 deals and it is considered to be the most popular target country by value as its deals reached 2.4 billion dollars which means it is 66% of all outbound regional activity. Following Egypt is the United Kingdom with 3 deals.

Value is leading the Telecommunication industry through Saudi Telecom acquiring Vodafone Egypt with 2.39 billion dollars and Volume is leading the Real Estate industry with 7 deals and it is second by value with 547 million dollars.

This makes the outbound activity of M&A in the Middle East increase by volume and value to reach 36 deals valued 2.6 billion dollars in the first quarter in 2020 while in the last quarter of 2019 it was 30 deals valued 3.47 billion dollars.

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