MENA M&A deal value up 23 per cent in Q3 2017

In the third quarter of 2017, a total of 76 deals were announced, a decrease of 10 per cent when compared to the 84 deals in Q3 of 2016. MENA M&A deal value, however increased by 23 per cent to $4.3 billion, up from $3.5 billion in Q3 2016 according to the EY Q3 2017 M&A report.
Phil Gandier, MENA Transaction Advisory Services Leader, EY, says: “MENA executives continue to remain confident about the M&A market. According to the latest EY Capital Confidence Barometer, a record 65 per cent of respondents indicated their intention to actively pursue deals in the next 12 months. With the recent oil prices, a slow-growth environment and the diversification agendas of many MENA countries still more in the planning than execution stages, MENA executives understand that they need to ‘buy’ versus ‘build’ to remain competitive.”
Domestic M&A saw the largest y-o-y improvement, increasing by 17 per cent in number and 343 per cent in value. Furthermore, the average size of domestic deals rose by 258 per cent compared to Q3 2016. However, inbound and outbound deals did not fare as well, decreasing by 21 per cent and 26 per cent, respectively compared to Q3 2016.
The largest deal announced in Q3 2017 (pending regulatory approvals and completion) was the acquisition of a minority stake in Banque Saudi Fransi for $1.5 billion by Kingdom Holding Company (KHC).
Saudi Arabia ranked the highest among the MENA countries by value in Q3 2017 with five deals amounting to $1.6 billion. Kuwait followed with five deals valued at $914.8 million, and the UAE with 21 deals amounting to $547.4 million. Of the 76 MENA deals in Q3 2017, banking and capital markets was the top performing sector by deal value reaching $1.5 billion, followed by the telecom sector with a total deal value of $847 million.
MENA executives are feeling pressure as current business models undergo change, with nearly one-third citing the impact of digital technology and transformation as the primary force propelling changing customer behaviors and heightening threats from digitally enabled competitors and start-ups.
Anil Menon, MENA M&A and Equity Capital Markets Leader, says: “To some extent we are in uncharted territory with strategic acquirers viewing this as the best time to make long term bets and sellers grappling with pricing-in policy ambiguity and volatile geopolitics. With MENA private equity turning net sellers, we expect the valuation gap to decrease.”