Dubai: Mergers & Acquisitions (M&A) deals in the UAE more than doubled in 2018 to $10.4 billion (Dh38.19 billion), according to data from Mergermarket, a provider of M&A data and intelligence.
The Middle East and North Africa (Mena) region as a whole experienced a significant spike in deal value and a total number of deals in 2018. Total deal values for the area in 2018 surged to $26.76 billion last year compared with $15.86 billion in 2017, an increase of 68.7 percent.
The significant growth in deal value was driven by increased deal-making in the UAE as well as blockbuster deals in Saudi Arabia and North Africa.
“Mena M&A had a bumper year, particularly in H1, although macro factors somewhat muted the second half. Nonetheless, 2019 is expected to see a continued pickup in M&A, with deals that have been waiting in the wings coming to fruition,” said Elaine Green, editor of Mergermarket EMEA Bureaus.
Abu Dhabi National Oil Company (ADNOC) played an essential role in deal flows in the UAE with a series of seven divestments on its energy assets worth $6.2 billion. The total deal count in the region last year jumped by 15 deals to 148, compared to 133 in 2017.
The first half of 2018 saw a considerable rise in value to $15.16 billion, from $9.13 billion in 2017, and a moderate increase in the number of deals, to 87 from 71. By contrast, the second half of the year was more subdued with 61 transactions totaling $11.59 billion, due to macro-economic and geopolitical headwinds.
Cross-border MENA deals, which totaled 77 contracts worth $14.21 billion, saw the highest volume of inbound M&A on record and the highest value since the global financial crisis. Domestic M&A worth $12.54 billion was considerably higher than $8.742 billion in 2017, although deal count was marginally lower.
Two sizeable deals in Saudi Arabia drove the increase in domestic activity: Saudi British Bank and Alawwal Bank’s $4.7 billion tie-ups, the second biggest deal in the regional Financial Services sector since 2001; and Saudi International Petrochemical’s $2 billion acquisition of Sahara Petrochemical.
“Energy will still be a hot sector. Growth in consumer deals will probably continue, as more rapidly changing lifestyle choices impact purchasing habits. Infrastructure deals will loom large as transport and city development remains a growth driver across MENA, despite bankers warning of real estate market headwinds in the UAE,” said Green.
Despite unprecedented global levels of fund-raising and sky-high values seen elsewhere, private equity investments in Mena remained low. Nonetheless, buyout deal value in 2018 increased considerably to $1.186 billion, compared to 2017 when there were just 12 deals worth $264 million. Overall private equity exit deal values dropped to $1.2 billion from $2.32 billion, but deal count remained stable at 14.
According to Mergermarket, relatively low PE activity is the result of a robust sell-side market in Europe and North America, which provided foreign PE firms with ample opportunities in their home markets. The sudden collapse of UAE-based Abraaj Capital, one of the region’s most prominent private equity firms, which holds stakes in companies including Careem Networks, also influenced relatively poor performance.