M&A activity in the Middle East & North Africa (MENA) weakened in 2010, with the total value of deals dropping 26.6 per cent, from $23.7bn in 2009 to $17.4bn in 2010, mergermarket data reveals.
According to the leading proprietary data provider of M&A intelligence, the number of deals closed in each of the four quarters was 48, 46, 41 and 45, respectively, down from the five-year peak of 66 in the first quarter of 2008. The number of deals closed continued to fall throughout that year, until the first quarter of 2009 by which time the number of deals had dropped to just 28.
This reflects the fact that liquidity was tight as well as the difficulty of potential acquirers identifying suitable targets, which is also partly a result of a gap remaining between the price expectations of buyers and sellers, said mergermarket head of GCC and Middle East, Lucia Dore.
Andrew Tarbuck, partner at international law firm Latham & Watkins also said: “There is limited leveraged M&A in the Middle East region and bank credit remains tight.” However, M&A is “heading in the right direction but there is unlikely to be a significant pick-up until at least mid year as the global economy recovers and the appetite for risk returns,” he added.
The data also shows that telecommunications, financial services and energy, are the most active sectors for M&A activity in MENA. “This is a trend that is expected to continue and greater M&A activity in the logistics and transportation sectors, such as ports, is also anticipated,” said Dore.
“We expect M&A in the region to be spurred by family businesses selling non-core assets and, at the same time, using those funds to diversify into new activities, buying assets when valuations remain low. Government entities could also sell assets as they look to reduce their debt,” she added.
Mergermarket data also shows that MENA’s contribution to global M&A activity is also starting to increase even though its contribution still remains less than 1 per cent of total activity.