According to Ernst & Young’s MENA Mergers & Acquisitions update, the total value of mergers and acquisitions (M&As) announced in the Middle East and North Africa (MENA) region dropped by 40%, to US$8.5 billion in Q1 2012 from US$14.1 billion in Q1 2011.
Compared to the previous quarter (Q4 2011) which saw announced deals worth US$7.2 billion, the total M&A deal value (US$8.5 billion) in the first quarter of this year jumped by 18.1%.
The volume of announced M&A deals increased by 7%, from 98 deals in Q1 2011 to 105 deals in Q1 2012. Average announced deal size was down 34.7%, from US$372.1 million in Q1 2011 to US$ 242.9 million in Q1 2012.
Phil Gandier, MENA Head of Transaction Advisory Services at Ernst & Young: “We are still seeing a level of caution in the regional markets. Overall, the positive news from the 2012 Q1 M&A numbers is that the start of this year has been better in comparison to the start of 2011.”
“A total of 19 sovereign wealth and private equity deals took place in Q1 2012, with 10 deals in the month of March alone. This could mean that private equity players, who are usually the first movers in M&A, are taking comfort from upward revisions of regional economic growth projections and are gaining in transaction confidence,” added Phil.
The top 10 deals in Q1 2012 are valued at US$7.27 Bn or 85.5% of the total regional M&A deal value. Of these, five are outbound (regional business buying international assets), three are domestic (regional business buying regional assets) and two are inbound (international business buying regional assets).
The top two deals by value in Q1 2012 are both worth US$2 Bn and involve UAE SWF/PE firms buying global assets.
These deals are Mubadala Development’s acquisition of Brazil’s Grupo EBX and Centurion Investment Company’s acquisition of India’s UAE Exchange & Financial Services.
The third spot went to France Telecom SA who bought a US$973 Mn stake in Egyptian Company for Mobile Services.
The fourth and fifth spots were occupied by Qatari investors buying UK and UAE assets.
These include the US$525 Mn announced deal of Qatar Investment Authority buying One Cabot Square in the UK, and Mannai Corporation’s US$445 Mn investment in Damas International respectively.
With a disclosed deal value of US$5.5 Bn in Q1 2012, outbound1 deals make up 64.7% of M&A transactions in Q1 2012.
Domestic and inbound deals were both 17.64% of total value at US$1.5 Bn each. In the cross-border segment, average size of inbound deals increased by 68.9%, rising from US $113.1Mn in Q1 2011 to US $191 Mn in Q1 2012.
Average announced deal size in the outbound category dropped 34.2% in value between the two periods, from US$691 Mn in Q1 2011 to US$454.8 Mn in Q1 2012.
Average domestic deal size dropped by 65.4% from US$292.2 Mn in Q1 2011 to US$101.1 Mn in Q1 2012, as Zawya stated.
“Regional investors continue to dominate the M&A market and continue on their path of large international investments for solid assets. This trend will continue going forward,” said Phil.
In terms of total domestic deal value in Q1 2012, Consumer Products assets have replaced Real Estate as the most sought after sector in MENA, valued at US$572Mn.
Real Estate saw deals worth US$562.1 Mn, followed by Transportation and Insurance deals worth US$140 Mn and US$125 Mn, respectively.
In terms of total volume of domestic deals, Consumer Products led with seven, followed by Real Estate, Banking and Capital Markets, and Diversified Industrial Products, all with six deals.
UAE topped the region in terms of total value, comprising approximately 29% of total domestic disclosed deal value (worth US$445 Mn); followed by Qatar also at 29% of total domestic deal value (worth US$439.6 Mn); and Saudi Arabia at third position with 20 % of deal values worth US$304 Mn.
In terms of deal volume in Q1 2012, the main countries targeted for domestic deal activity in MENA include the UAE with 13 deals, followed by Saudi Arabia and Egypt with 7 deals each.
In this study, Ernst & Young have categorized deals as Outbound- MENA investors doing deals outside the MENA region, Domestic- MENA investors doing deals in MENA region, and Inbound- non-MENA investors doing deals in the MENA region