Deal-making to pick up in 2010 as economy shows growth signs

Deal-making to pick up in 2010 as economy shows growth signs. (REUTERS)

After a sharp crunch in deal-making in 2009, experts believe the deal flow is starting to open up again as capital markets seem to be kicking and the economy shows signs of continued improvement.

"The deal-making landscape looks promising for 2010 on the back of economic uncertainty (both global and regional)," MR Raghu, Senior Vice-President – Research, Kuwait Financial Centre (Markaz) told Emirates Business.

Agrees Azhar Zafar, Head of Mergers & Acquisitions at Ernst & Young Middle East. "There is a growing sense of anticipation about the global M&A environment. We expect acceleration of industry consolidation in the next 12 months and a few industry winners best able to exploit acquisition opportunities are likely to emerge," he said.

Substantiating experts' views is data that shows that the region has already witnessed deals worth $1bn in the first 15 days of the year.

Last year, on the other hand, was a particularly bad time as companies became risk averse and were reluctant to deploy their cash.

According to Ernst & Young, M&A deals announced in the Middle East and North Africa region dropped by 54 per cent in value to $7.14 billion (Dh26.2bn) in the third quarter of 2009 compared to deals worth $15.64bn announced in the same period last year.

M&A activity also fell 26 per cent in terms of the actual number of announced deals. A total of 97 deals were announced in the third quarter of 2009 against 134 in the third quarter of 2008.

But this year, experts seem upbeat about the prospects of increased activity but they believe that any drop in investor confidence and a reversal in economic rebound may be detrimental to mergers and acquisitions.

"Although 2010 promises to be an year of positive growth, yet surprises can be many as visible green shoots are still being hunted for confirmation," said Raghu.

Although deal-making in 2009 was down globally, the total value of oil and gas M&As rose 10 per cent on the previous year to $198 billion, a report from Ernst & Young said. Deal volume was much higher in the second half of the year, as the oil price and capital markets improved and that trend is expected to continue into 2010, the report said.

 

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