Posted on February 09, 2015

Announced MENA M&A deals rose by 6% in 2014 to 468 deals from 442 deals in 2013 on the back of strong market fundamentals, according to EY’s Q4 MENA M&A update. In 2014, announced deal value decreased from US$50.7b in 2013 to US$44.9b in 2014, a decrease of 11%.

Phil Gandier, MENA Head of Transaction Advisory Services, EY says: “The MENA M&A market performed very well in 2014. Deal value saw a slight dip compared to last year, as 2013 witnessed some large ticket consolidations. However the number of deals was 6% higher as regional markets displayed resilience to oil price volatility. The growth of MENA M&A is expected to continue in 2015 at a normalized year on year growth rate of up to 10%. The majority of MENA M&A transactions tend to occur in consumption-led sectors such as food and beverage, retail, healthcare and education, which have little correlation to economic activity and changes in oil price, so the positive trend is expected to continue.”

Q4 2014 ended the year strongly with 150 deals with a value of US$16.2b, the highest value and number of announced deals in 2014. Compared to the same quarter in 2013, Q4 announced deals doubled in value and increased by 26% in number.

Outbound deals are back to leading the market

Outbound announced deal value increased by 19% from US$18.5b in 2013 to US$22.0b in 2014, signaling a return in the trend of outbound deals leading the MENA M&A market. Domestic and inbound announced deal values decreased by 31% and 24% respectively in 2014 compared with 2013.

Anil Menon, MENA M&A and IPO Leader, EY, says: “We expect to see outbound M&A deals continue to lead the market into 2015. With the exception of 2013, which saw domestic deal value exceed outbound deal value, outbound  deals have historically been the most popular option for MENA investors. We expect investors to continue looking outside the region for investment, particularly in sectors such as real estate and oil and gas.”

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High potential for M&A growth in Egypt, UAE, Saudi Arabia and Qatar

The MENA M&A market will be led mainly by the GCC, namely the UAE, Saudi Arabia and Qatar. The revival of Egypt’s M&A market in 2014 is expected to continue in 2015.

“The UAE dominated as the target country with the largest number and value of inbound deals in MENA which points to the strong confidence of international investors in the UAE’s potential. Egypt also came back into the deal market with a vengeance in 2014 with many multinationals investing in Egypt. The return of investments into Egypt signals that international companies are willing to bet on the long term future of Egypt as they see stability improving. Saudi Arabia will see a number of local family businesses looking to reconfigure their investments to focus more on their core businesses,” comments Anil.

PE deals and family businesses to drive M&A in 2015

In the private equity space, 90 SWF/PE deals were announced in 2014, with December 2014 having the most activity of 18 deals followed by November with 11 deals. “The total number of MENA deals in 2015 are expected to range from 400-500, continuing the same trend that we’ve seen in the past few years. We expect to see a lot PE equity deals in particular as an increasing number of PE firms will be seeking exits for their investments,” concludes Phil.