- Global deal activity remained flat year-on-year
- Overall Middle East M&A activity increased in volume and value in Q4 2017 compared to Q3 2017
- Cross-regional M&A value increased by 85% compared to Q3 2017
- UAE dominated both inbound and outbound Middle East M&A by volume
Global M&A deal-making in 2017 stayed in line with 2016 levels, with overall global deal volumes rising slightly by 3% and flat growth in terms of value, and Middle East activity rallied in the last quarter of the year, according to the latest report by global law firm Baker McKenzie.
Despite tighter scrutiny on foreign deals, the United States (US) was both the most acquisitive and targeted region globally in Q4 2017, with 569 outbound deals valued at US$60 billion and 506 inbound deals valued at US$78 billion. In Europe, cross-border activity involving the United Kingdom continued to take a hit in the wake of Brexit developments and elections in the region, with a decrease in both volumes and values compared to Q3 2017. In Asia, China outbound deal-making slowed down at the close of year as a result of the regulatory crackdown on overseas deals, while Japan inbound and outbound deal values dropped significantly from the previous quarter by 87% and 73% respectively.
Middle East M&A activity
Total Middle East deal volumes fell 10% in 2017, compared to the previous year, with deal values also declining by 31%. Nevertheless, overall deal activity rallied in Q4 2017, with deal volumes up 8% and aggregate value up by 21% at US$6.6 billion compared to the previous quarter. Cross-regional M&A deal volumes also increased by 8%, while deal values increased by 85% from Q3 2017, driven by the US$1.06 billion acquisition of Bahrain's National Petroleum Services. Eighty percent of all Middle East M&A activity was cross-border in nature in Q4 2017 and the United Arab Emirates (UAE) once again drove both inbound and outbound M&A in the region.
“Despite overall deal activity in the Middle East decreasing in both value and volume in 2017, the rally witnessed in the last quarter of the year was very positive," said Omar Momany, Head of Corporate/M&A at Baker McKenzie Habib Al Mulla, based in the UAE. "The increase in cross-border M&A deals by value and volume in the last quarter of 2017 reflect the sustained investor appetite in the Middle East."
Inbound Cross-regional Middle East M&A
The value of cross-regional deals targeting the Middle East increased significantly by 194% to US$1.9 billion in Q4 2017 from US$630 million in the previous quarter, driven by the National Petroleum Services acquisition. Deal volume also rose by 35%, with a total of 31 deals during the same quarter.
The UAE was the top target country for inbound deals by volume in Q4 2017, attracting 15 out of 31 deals, valued at US$516 million, while Bahrain was the top target country by value, with US$1.06 billion from one deal. The US was the top bidder country both by volume and value during the same quarter, with six deals valued at US$1.2 billion.
The Energy & Power sector was the most active sector in respect of inbound Middle East investment, both by volume and value in Q4 2017, registering seven deals amounting to US$1.3 billion.
"We expect regional deal activity to remain fairly consistent in the coming years, with particular interest in the consumer-facing, infrastructure and technology sectors driven by the demand for innovation and new business models," commented Will Seivewright, Corporate/M&A Partner at Baker McKenzie Habib Al Mulla, based in the UAE.
Outbound Cross-regional Middle East M&A
By value, outbound cross-regional deals from the Middle East increased by 52% in Q4 2017 to US$2.3 billion compared to US$1.5 billion from the previous quarter. However, this was generated from fewer deals (37 deals), representing a 10% decline in volume from Q3 2017.
The UAE was the top bidder country both by volume and value, comprising more than half of the total outbound M&A activity, with 19 of the 37 deals originating from the Middle East amounting to US$1.07 billion.
The top target countries for outbound M&A by volume included the United Kingdom, United States, Spain and Italy with three deals each, while India was the top target country by value, with two deals valued at US$1 billion, including the acquisition of the Indian unit of National Investment & Infrastructure Fund Ltd by the Abu Dhabi Investment Authority.
The Industrials sector was the most active sector both by volume and value of deals originating from the Middle East, with a total of 10 deals valued at US$1.03 billion.
Zahi Younes, Corporate/Capital Markets partner at Baker McKenzie's associated firm in Saudi Arabia, added, "Unprecedented economic reforms, openness to foreign investment and future infrastructure requirements in the Middle East are going to present enormous opportunities in the medium and long term and continue to sustain levels of regional M&A activity.”