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22 July 2024

Sovereign funds likely to dominate M&A in GCC

Imad Ghandour (FILE)

By Shuchita Kapur

Sovereign wealth funds and some private equity players are expected to dominate the merger and acquisition market in the region, said experts.

This year the merger and acquisition will mainly be driven by GCC governments' initiatives to stabilise the real estate and equity markets and their efforts to boost market conditions.

Furthermore, the relatively low valuations will encourage SWFs to acquire stakes in local as well as global companies, said Global Investment House (GIH).

Alaa El Din Rady, co-founder and MD of Enmaa Financial Services, an Egypt-based financial services firm, believes SWFs are expected to play a big role going forward. "Nearly 75 per cent of their [SWFs] investments were made in developed markets, which resulted in heavy losses in 2008 (around 25 per cent of their investments were lost), those SWF are expected to re-direct their investments to developing markets still offering solid growth opportunities and expected to yield higher returns," he told Emirates Business.

Imad Ghandour, Executive Director, Gulf Capital agrees. "Some of the SWFs and private equity players will take advantage of the low-pricing level of some assets at some point. However, on the negative side, we will not see big cross border acquisitions like the multi-billion acquisitions done in 2006 and 2007 in Europe and US, and expansion through acquisition will be much reduced than before," he said. "SWFs will implement a development agenda set by their respective governments, and we will probably see SWFs funding mainly green field projects in the local market. However, I don't see significant activity of SWF in cross-border acquisitions," he added.

Ghandour said private players will be divided into two camps. "One camp has money and will continue to make acquisitions and take advantage of the depressed asset values. The other camp has no cash on hand, and will have limited role in the M&A activity."