GCC M&A market rebounds with 39% volume growth
Published: 03:12 PM,Dec 13,2021 | EDITED : 07:12 PM,Dec 13,2021
Following an unprecedented economic shock caused by the sudden global health crisis, mergers and acquisitions (M&A) activity stopped in its tracks in 2020. However, the segment has since rebounded strongly, with deals soaring in volume and value in 2021, according to a new report by Boston Consulting Group (BCG) in collaboration with Germany’s Professor Sönke Sievers of Paderborn University.
The report, titled Master the Art of Breaking Up, sheds light on both positive and negative scenarios that have transpired across global markets in recent times, including in the GCC.
This 18th annual analysis of the GCC’s M&A landscape is based on BCG’s M&A database of more than 4,500 deals from January 1990 to June 2021. This edition of the report comes after the impact of COVID-19 had been seen on the sector. The volume of deals in the GCC between 2019 to 2020 had decreased by 15 per cent and the deal value declined by 61 per cent (from $85 billion in 2019 to $33 billion in 2020). The report further shows that while the GCC’s M&A deal value of the first half of 2021 has not fully picked up ($14 billion for the first half of 2021, 47 per cent below the levels of the first half of 2020), the GCC’s M&A market is recovering from the pandemic, with the volume of deals for the first half of 2021 relative to the first half of 2020 increasing by 39 per cent.
“Despite the ongoing crisis, the impact on M&A deals being made has proven to be temporary, with volume rallying substantially this year following an intense period of difficulty not long ago,” explained Ronald Maalouf, Managing Director and Partner, BCG.
“The outcome for the region is attributed to a higher volume of transaction, as well as corporate decision-makers, investors, and deal brokers operating across the region. Their adaptability has collectively enabled the M&A segment to rebound favorably generally, although deal value must now follow the volume of deals in rebounding before the re-emergence processes are concluded, which rests with a collective effort from respective local markets.” Notwithstanding global M&A deal value rallying thus far in 2021, the GCC has seen a contrary trend in this area, with overall regional deal value down by 47 per cent when comparing the first half of 2020 to the first half of 2021.
For example, the Kingdom of Saudi Arabia (KSA), had recorded a decrease in deal value in the first eight months of 2021, albeit an increase in the volume of deals by 13 per cent. The decrease of deal value is an indication of less large-scale transactions that the Kingdom has seen in previous years – such as Saudi Aramco’s acquisition of SABIC in 2019 and the National Commercial Bank’s merger with Samba Financial Group in 2020.
Similarly, in Qatar, deal value decreased in the first eight months of 2021, although the volume of deals had grown by over five times when compared against the first eight months of 2020. Akin to the trends in KSA, Qatar’s 2020 figures were propelled by a large merger in 2020 – a $2.2 billion merger between Masraf Al Rayan and Al Khaliji Commercial Bank propelling overall value in 2020 to $4 billion (double the country’s $2 billion deal value average between 2015 to 2020).
Meanwhile, deal value in the United Arab Emirates (UAE) has increased sharply alongside the volume of deals in the first eight months of 2021, recording a total of 100 deals amounting to $11 billion. This is mainly due to a rebound in large deals, with four such transactions valuing over $1 billion in total, contributing to a 433 per cent increase compared to the first eight months of 2020.
The report, titled Master the Art of Breaking Up, sheds light on both positive and negative scenarios that have transpired across global markets in recent times, including in the GCC.
This 18th annual analysis of the GCC’s M&A landscape is based on BCG’s M&A database of more than 4,500 deals from January 1990 to June 2021. This edition of the report comes after the impact of COVID-19 had been seen on the sector. The volume of deals in the GCC between 2019 to 2020 had decreased by 15 per cent and the deal value declined by 61 per cent (from $85 billion in 2019 to $33 billion in 2020). The report further shows that while the GCC’s M&A deal value of the first half of 2021 has not fully picked up ($14 billion for the first half of 2021, 47 per cent below the levels of the first half of 2020), the GCC’s M&A market is recovering from the pandemic, with the volume of deals for the first half of 2021 relative to the first half of 2020 increasing by 39 per cent.
“Despite the ongoing crisis, the impact on M&A deals being made has proven to be temporary, with volume rallying substantially this year following an intense period of difficulty not long ago,” explained Ronald Maalouf, Managing Director and Partner, BCG.
“The outcome for the region is attributed to a higher volume of transaction, as well as corporate decision-makers, investors, and deal brokers operating across the region. Their adaptability has collectively enabled the M&A segment to rebound favorably generally, although deal value must now follow the volume of deals in rebounding before the re-emergence processes are concluded, which rests with a collective effort from respective local markets.” Notwithstanding global M&A deal value rallying thus far in 2021, the GCC has seen a contrary trend in this area, with overall regional deal value down by 47 per cent when comparing the first half of 2020 to the first half of 2021.
For example, the Kingdom of Saudi Arabia (KSA), had recorded a decrease in deal value in the first eight months of 2021, albeit an increase in the volume of deals by 13 per cent. The decrease of deal value is an indication of less large-scale transactions that the Kingdom has seen in previous years – such as Saudi Aramco’s acquisition of SABIC in 2019 and the National Commercial Bank’s merger with Samba Financial Group in 2020.
Similarly, in Qatar, deal value decreased in the first eight months of 2021, although the volume of deals had grown by over five times when compared against the first eight months of 2020. Akin to the trends in KSA, Qatar’s 2020 figures were propelled by a large merger in 2020 – a $2.2 billion merger between Masraf Al Rayan and Al Khaliji Commercial Bank propelling overall value in 2020 to $4 billion (double the country’s $2 billion deal value average between 2015 to 2020).
Meanwhile, deal value in the United Arab Emirates (UAE) has increased sharply alongside the volume of deals in the first eight months of 2021, recording a total of 100 deals amounting to $11 billion. This is mainly due to a rebound in large deals, with four such transactions valuing over $1 billion in total, contributing to a 433 per cent increase compared to the first eight months of 2020.