Nine new merger and acquisition (M&A) plans with potential worth of well over $12.4 billion have been announced by companies in the Middle East and North Africa (MENA), according to Regional Press Network (RPN)’s DealFlow Monitor.
The largest imminent M&A transaction is a sale of telecommunications assets by Egypt’s Orascom Telecom Holdings to South African MTN.
Gulf Cooperation Council countries are expected to return to the pre-crisis boom times in M&As, projected to reach $25 billion this year and up to $100 billion in 2011, according to the GCC M&A Barometer survey conducted by Zawya and M Communications.
The GCC M&A Barometer surveyed 27 investment banks, which highlighted telecommunications and financial services as two industries in the Middle East that will see more consolidations. The majority of M&As are expected to take place within the GCC, with Saudi Arabia leading the United Arab Emirates, followed by Qatar. Some 85 percent of bankers expect mid-market transactions to dominate the M&A market this year.
The new projects announced in the one-month period between mid April and mid May of this year, have pushed the known portfolio of major business partnership deals in the region — acquisitions, mergers, joint ventures, venture capital participations, strategic and financial investments — to more than 940 deals with an aggregate value of $142.6 billion, since January 2009, according to the RPN’s DealFlow Monitor.
Telecommunications transactions represent the largest slice of the pie in this period, at $32.3 billion, followed by deals in financial services, at $25.6 billion.
Oil and gas investments rank third, with a value of $19.9 billion. The three sectors account for 60 percent of deals recorded by RPN Dealflow since January 2009.
A recent report by Ernest & Young found that M&A deals announced in the Middle East and North Africa dropped by 67 percent in value to $34 billion in 2009, down from $102 billion in 2008.
The largest transaction recorded in the past 16 months was concluded with a definite sales agreement in March when India’s Bharti Airtel acquired mobile communications network assets from Kuwait’s Zain Group in a $10.7 billion deal. As a comparatively large deal, the Zain IPO accounted for 48 percent of all telecom M&As recorded between Jan 2009 and end of March 2010.
The biggest deal cancellation over the same period was the $1.7 billion fire sale of Dubai construction leader Arabtec to Abu Dhabi’s Aabar Investments, which was called off in mid April.
The two companies said the cancellation was in mutual agreement, despite the suddenness and dearth of information involved, which was matched only by the suddenness and dearth of information involved in the initial bombshell announcement in January.
One in every four M&A deals of just over 200 deals tracked by RPN Dealflow between January 1 and April 15 of this year involved a partner outside of the MENA region (inclusive of Turkey) but most of these deals related to assets located within MENA.
Analysts say that outbound M&A activities by cash-heavy Arab Sovereign Wealth Funds and private wealth aggregators will proceed with more scrutiny and inbound flows will witness the increasing appetite of international players for slices of MENA economic activities.
Dynamics of M&A in one sector often get a stimulus from a major deal closing, as demonstrated when Zain’s telecoms sale to Bharti was quickly followed by MTN and Orascom disclosing that they entered discussions for an MTN takeover of Orascom’s Algerian unit, Djezzy.