Baker McKenzie: Egypt M&A deal values quadruple 394% in H1

Merger and acquisition (M&A) transactions in Egypt has almost quadrupled during the first half of 2021 with 111 deals with value exceeding $4 billion, according to the latest report by global law firm Baker McKenzie.

This is compared to only 74 M&A deals worth $906 million in the first half of 2020.

The trend was reflected globally and in the Middle East region.

Globally, M&A activity saw a strong rebound during the first half of 2021 as total deal values soared by 120 percent and volumes by 22 percent from the same period last year, the report added.

In the Middle East, M&A activity continued its upward trend having 307 deals in the first half of 2021, marking a significant surge by 59 percent and 48 percent when compared to the same period last year as well as to the second half of 2020, respectively.

As for total deal values, Baker McKenzie’s report said they recorded a 7 percent fall from $43.5 billion in the first half of 2020 to $40.3 billion in the first half of 2021 whereas values doubled in comparison to the second half of 2020 that registered deal values of $13.2 billion.

“Despite the challenging global economic backdrop which varies in each country, M&A transactions in Egypt has been robust in the first half of 2021. During H1 2021, Egypt marked the most popular regional target market for outbound M&A and the second by volume with 18 deals valued at $1.8 billion.” Mohamed Ghannam, managing partner at Helmy, Hamza & Partners, Baker McKenzie Cairo, said.

Total M&A Deal Activity (including domestic and cross-border deals)

Overall deal making in Egypt was up across most months of the first half of 2021, with March as the busiest and the highest month recording 25 deals with a total of $2.2 billion.

“Domestic transactions were slightly higher compared to cross-border in terms of volume (59 deals vs 52 deals) however, cross border deals were bigger in terms of value with a total of $2.8 billion (a Y-o-Y increase of 278 percent) as compared to $1.6 billion for domestic deals (a Y-o-Y increase of 925 percent).” Baker McKenzie report.

“When comparing domestic deals in H1 2021 to H1 2020, we note that deal activity rose dramatically in both volume and value in H1 2021 compared to the same period last year, with about 40 percent increase in deal volumes (59 deals vs 42 in H1 2020), and deal values soaring from $162 million to $1.6 billion.”

The same applies to cross-border deals which significantly provided a larger total value of $2.8 billion in the first half of 2021 versus $744 million in the first half of 2020 as well as a higher volume of 52 versus 32 for the same periods.

Hani Nassef, M&A Partner at Helmy, Hamza & Partners, Baker McKenzie Cairo, said: “Interestingly, Egypt has been increasingly active and the domestic investment environment has been following the same bullish trend in the Middle East and globally.

“With a stable post-pandemic economy, we do expect further growth momentum for M&A transactions in the country in the coming months and leading to the New Year.” Nassef added.

Meanwhile, Mohamed Barakat, M&A Partner and co-head of M&A at Helmy, Hamza & Partners, Baker McKenzie Cairo, stated: “We are expecting to see more acquisition deals in the second half of 2021 that vary between acquisition deals in the form of assets and stocks in a number of economic sectors that has investment opportunities and in various stages.”

Inbound Cross-Border M&A Deal Activity (including targets in Egypt and acquirers outside Egypt)

Most of cross-border deals were inbound in nature with 39 deals worth $2.5 billion compared to only 13 outbound deals totaling $231 million, the report read.

“There was an increase in activity for inbound deals across all sectors, however, the Financials industry served as the top target of inbound investors with 10 deals, up 900 percent compared to previous year. Healthcare came in second with 6 deals.”

“Value-wise, Healthcare was the top sector with $1.5 billion in total value, followed by Financials with $617 million. This is evident with the acquisition of Amoun Pharmaceutical Co by Abu Dhabi Developmental Holding Co for $740 million which was the top inbound deal of the period.”

UAE dominates inbound cross-border M&A as top acquirer by volume and value

The United Arab Emirates remained the top acquirer country by volume with 11 inbound deals in the first half of 2021, 120 percent higher than the first half of 2020.

United States ranked second in terms of volume at 8 deals followed by Saudi Arabia and the United Kingdom with 5 deals each.

In terms of deal values, the United Arab Emirates also came first amounting to $1.7 billion followed by Libya with $429 million.

Outbound Cross-Border M&A Deal Activity (including acquirers from Egypt and targets outside Egypt)

For outbound deals, the Consumer Products and Services, and Energy and Power topped with three deals each. In addition, Consumer Products and Services was also the top industry value-wise with $122 million.

The United Arab Emirates served as the top investment target country for Egyptian companies in the region, making five deals in the period followed by Kuwait with two deals, the report added.

As for values, Ghana came first featuring the $121 million deal to acquire Ghana’s Right to Dream by Al Mansour Holding was the top outbound transaction. Kuwait ranked second with $54 million.

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