The Middle East will see only a gradual pick up in M&A activity in 2011, as potential sellers wait for asset prices to recover further, the head of investment bank Moelis & Company said in an interview.
Kenneth Moelis, chief executive of Moelis & Company, said he expected any merger activity to be dominated by strategic deals in sectors such as natural resources, chemicals, transportation and logistics.
"It is not as much speculative mergers as it is strategic mergers in discussions at this point. There are some great opportunities and this is a very cash flow-generating region," he said in the interview.
"But you have got to have a seller. No-one really wants to sell at the bottom. Prices have to get back so that the seller thinks they are in a fair market and so does the buyer."
Although M&A volumes are likely to be higher this year than in 2010, the increase will be slow and gradual, Moelis said.
Regional merger and acquisition (M&A) activity slowed down sharply in the wake of the global financial crisis as companies struggled to maintain cash flow and pay off debts.
But Middle Eastern M&A reached $31 billion in 2010, Thomson Reuters data shows, more than double the volumes in 2009.
Moelis & Company, which has an office in the Dubai International Financial Centre, currently has about six regional mandates, ranging from restructurings to M&A advisory.
"As companies look to acquire or merge, initially it will be regionally focused, into North Africa, south-east Asia, Turkey," said Augusto Sasso, Moelis's head of MENA (Middle East and North Africa) investment banking.
Moelis & Company advised the Dubai government on the $25 billion debt restructuring of conglomerate Dubai World.
"There is nothing unique about 2011 in regard to asset sales - obviously, over the next eight years, there will be asset sales," said Sasso, adding that companies are focussing on how to maximise values before any sales.