Merger and acquisition (M&A) activity in Middle Eastern markets has opened windows for economic and financial activity this year, while doors have been shutting on listed equity and new public offerings.
Reaching $30.5 billion, the cumulative value of mergers and acquisitions and private investment deals completed from January through to the end of July 2010 in the Middle East and North Africa was up 14 percent from the transactions in the same period of 2009, according to the Dealflow Monitor by the Regional Press Network.
The number of completed transactions in the first seven months of 2010 showed an 8 percent drop from a year ago to 270, indicating that values per transaction have been tending higher.
The takeover expected to set the record for highest value this year was completed in June, through the sale of African assets of Kuwaiti telecommunications firm Zain Group to India’s Bharti Airtel for $9.1 billion. However, with a total of 440 deals having been announced this year to date across the MENA region, the list of merger discussions and pending deals promises another round of financial opportunities after the end of Ramadan and summer vacations. Banks and financial companies, such as insurers and investment firms, accounted for 20 percent of targeted companies for investment and takeover deals. Other sectors of significance as buy-in targets were manufacturing, oil and gas, utilities, real estate, and telecommunications.
The rate of increase, and the sector trends in deal making in the first seven months of 2010 confirm trends of a new regional boom in merger markets that started to take shape in 2009.
Most MENA countries have been attracting sizeable interest, with only Sudan, Syria, Tunisia, and Yemen missing out on the gold rush. Besides a continued wave of small and medium-sized transactions in the third and fourth quarters of 2010, some mega deals could still come about.
As the Zain Africa sale has changed the profile of the region’s telecommunications operators, the pull effect of big transactions on corporate peers in the same sector has led Arab operators to initiate several negotiations in the second quarter, which did not result in actual deals. This notwithstanding, the telecoms sector continues to be a candidate for potentially large deals in the remainder of 2010, as Egyptian telecoms tycoon Naguib Sawiris appears to be dead set on changing the ownership structure and market position of his assets.
In late August, rumors surfaced in international media that Sawiris has been talking to Russian telecoms firm VimpelCom about merging his Orascom and Wind assets into VimpelCom, in a deal estimated to be worth around $6 billion.
The Middle East can further benefit from an improved climate for mergers in international markets. A recent example of how a merger discussion by world-leading companies can impact regional firms was the bid of BHP Billington for a Canadian potash miner, as news of the negotiations boosted share prices of mining companies in Jordan. One longed-for marriage of two (almost) equals that many financial market players believe would act as a catalyst for new vigor in the United Arab Emirates market would be a joining of the Dubai Financial Market and the Abu Dhabi Stock Exchange. ADX and DFM were said to be in negotiations earlier this year but no concrete signals for this much wanted union have yet been made public.
