There were 119 transactions with Middle East-based target companies in Q1 2011 worth a combined $3.6 billion, according to the Zephyr Quarterly M&A Report issued by Bureau van Dijk (BvD), which termed the results “respectable despite unrest in the Middle East and North Africa.”
According to Zephyr data, deal value weakened 22 per cent from $4.6b in Q4 2010 and was 60 per cent lower than the $9b recorded in Q1 2010. However, the Q1 2011 result was flattered by low valuations in Q3 2010 and frail deal activity in Q3 2009.
Deal volume fell for the second successive quarter, all but erasing four consecutive periods of growth between Q3 2009 and Q3 2010.
The numbers were the strongest for the UAE while most other countries in the region witnessed a decline, according to Zephyr data. In Q1, the largest transaction by value was Centurion Investment’s purchase of a 40 per cent stake in UAE-based healthcare business NMC Healthcare, worth $1,089 million.
This one transaction accounted for 30 per cent of the total value of deals with Middle East targets recorded for the three months and propelled the UAE to the top of the deal value leader board.
The UAE was also the target of the number two deal by value, a $953 million convertible bond issue by real estate developer Aldar Properties.
As a result of these two transactions, the total value of deals with UAE-based targets was $2.36b – with around 40 per cent of this coming from the Aldar fundraiser.
The result was more than six times higher than the $382m recorded for deals with UAE-based targets Q4 2010. This quarter-on-quarter growth came alongside declining deal values for transactions targeting Kuwait, Bahrain, Jordan, Syria, Oman, Saudi Arabia and Iran.
There was a reasonable international investors interest in the Middle East in Q1, with buyers from Switzerland, the Netherlands, the US and Canada all investing in Middle East companies in Q1 – and all four countries featured in the top 20 transactions.
There was even a $7m purchase by Libyan Foreign Bank targeting Arab Jordan Investment Bank, though this completed in early February, just before protests spread around Libya.
International buyers included Tyco International, CCI International Holland, Odyssey Re Holdings Corporation and CCL Industries.
Private equity activity, however, continued to remain weak.
There was just one institutional buyout with an undisclosed value, down from two IBOs in Q2 2010. In total there were only three private equity and venture capital investments in the Middle East Q1 2011, compared with eight in Q4 2010.
Thanks to the NMC deal, the healthcare sector received most investment for the quarter.
The value of deals targeting education and healthcare operators surged from $5m in Q4 2010 to $1.68b in Q1 2011, mainly thanks to Centurion buying 40 per cent of NMC Healthcare for $1,089 million.
The fact that healthcare operators are not subject to the same cycles as many other industries – coupled with the health needs of ageing populations – makes this a sector to watch for future investment. NMC operates hospitals, medical centres and pharmacies across the UAE.
Construction was also an important sector by deal value in Q1 – with $1.16b from 22 deals – after deal value doubled quarter on quarter.
There was also growth over the three months for machinery, equipment, furniture and recycling, and food beverages and tobacco.
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