• 70% of all Middle East M&A activity was cross-border in nature
  • Cross-regional M&A volumes increased by 5%
  • Middle East domestic deal volume down 26% but deal value up 517% compared to Q2 2017
  • UAE dominated both inbound and outbound Middle East M&A

Despite a challenging start to the year, global cross-border M&A demonstrated resilience to geopolitical influences, registering growth in major markets in Q3 2017. However, domestic and cross-border activity in the Middle East declined from the previous quarter, according to the latest report by global law firm Baker McKenzie*.

Globally, the United States was both the most acquisitive and the top targeted region, with 484 inbound deals valued at US$50bn and 536 outbound deals valued at US$79.4bn. In Europe, although cross-border activity involving the United Kingdom slowed in Q3 resulting in a decrease in both volume and value, deal value year-to-date was up 44% compared to 2016. In Asia, China outbound deal value increased 44% from Q2 2017, while Japan cross-border deal value (inbound and outbound) doubled from the previous quarter.

Middle East M&A activity

Seventy percent of all Middle East deals were cross-border in nature in Q3 2017. Despite overall deal activity in the Middle East in Q3 2017 declining 10% compared to the previous quarter, cross-regional M&A deal volumes increased by 5% and the value of domestic deals spiked 517% from Q2 2017, driven by a Saudi Arabian mega deal (Kingdom Holding Co's US$1.54bn acquisition of Banque Saudi Fransi). The United Arab Emirates (UAE) continued its momentum by being the top target country for inbound investment into the Middle East by both volume and value in Q3 2017, as well as the most dominant country by volume driving outbound deals.

Strong economic fundamentals and ambitious growth strategies of countries such as the UAE and Saudi Arabia continue to draw investors to the Middle East, despite macroeconomic uncertainties,

said Will Seivewright, Corporate/M&A Partner at Baker McKenzie Habib Al Mulla, based in the UAE. “The convergence of technology with traditional sectors such as retail - exemplified by Amazon's acquisition of UAE's Souq.com - underlines the drive for innovation and demand for smart technology that is contributing heavily to deal activity in the region.”

Inbound Cross-regional Middle East M&A

Compared to the previous quarter, the volume of cross-regional M&A deals targeting the Middle East increased by 15% in Q3 2017. However, fewer mega deals meant that overall deal values halved in Q3 2017, down to US$630m from US$1.39bn in Q2 2017.

The UAE was the top target country for inbound investment by both volume and value in Q3 2017, attracting 18 out of 23 deals, valued at US$598m. The US was the top bidder country by both volume and value, with six deals valued at US$580m into the region.

The Financial Services and Industrials sectors were the busiest sectors for inbound Middle East M&A by volume in Q3 2017, accounting for four deals each, while the Retail sector led by deal value with US$582m worth of deals.

Outbound Cross-regional Middle East M&A

The volume of outbound cross-regional deals from the Middle East remained steady in Q3 2017 compared to the previous quarter (with 35 deals). However, this was a 49% decline year-to-date compared to 2016.

The UAE was the top bidder country by volume, driving half of the outbound deal activity with 18 of the 35 deals originating from the Middle East, followed by Bahrain with nine deals. Bahrain was the top bidder country by value, with deals amounting to US$479m, followed by Kuwait.

India and the UK were the top target countries for outbound M&A by deal volume, with four deals each, and the US was the top target country by deal value, with US$395m worth of deals.

The top sector by volume for outbound M&A in Q3 2017 was Technology, with seven deals, and the top sector by value was the Real Estate sector, with U$350m worth of deals.

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