The Middle East and Northern Africa region is expected to see increased corporate mergers and acquisitions in the next two to three years, with cumulative deals potentially reaching $100 billion, a sector expert said.
The pandemic has forced many companies to restructure, and the trend is likely to continue as consolidation occurs across sectors.
Banking and financial services and healthcare and industrial products are the main sectors expected to see more merger and acquisition activity in the next few years.
“Post recovery from the impact of the Covid pandemic, a rebound in the region’s mergers and acquisitions activities is expected over the coming years, with various sectors ready for consolidation and companies planning to reorganise and restructure,” George Thomas, managing director, transaction services, Protiviti Middle East Member Firm, told Arabian Business in an exclusive interview.
“Over the past three years – 2018-2020 – the cumulative deal size in the MENA region was around $165 billion. Excluding the one-off mega Saudi Aramco-Sabic deal in 2020 – pegged at $69 billion – the average annual deal volume is around $32 billion.
“This level of activity can be expected to sustain in the near to medium term,” said Thomas.
Thomas suggested a potential cumulative deal size of about $100 billion could be reached in the next three years.
Thomas also said in terms of deal count, the disclosed number of deals was in the range of 135 to 150 annually in the past three years, and this was expected to see an increase in the next three years.
The Protiviti Member Firm executive said the pandemic and the resultant impact on many businesses across sectors have created some unique drivers for merger and acquisition activity in the region.
George Thomas, managing director, transaction services, Protiviti Middle East Member Firm
“In the near term, strategic consolidation – rather than opportunistic diversifications – will be the key theme driving merger and acquisition deals in the region.
“Another key driver will be the strong focus on digital transformation, spurred by the changes brought about by the pandemic,” Thomas said.
The Protiviti Middle East Member Firm is currently working on several other merger and acquisition deals in the region.
The firm recently facilitated the acquisition deal of Kuwait-based Zajil International Telecom by Bahrain’s Kalaam Telecom.
Thomas said the banking and financial services sector was expected to witness a continued surge of merger moves, driven by consolidation and requirements for additional capital.
“However, other sectors such as healthcare and industrial products are also expected to see enhanced deal activity,” he said.
Thomas said although the banking and financial services sector had some notable deals over the past year on the back of consolidation of assets, other non-banking sectors are also witnessing a surge in activity.
The firm recently facilitated the acquisition deal of Kuwait-based Zajil International Telecom by Bahrain’s Kalaam Telecom
“There has been considerable activity in the non-banking sectors [in the MENA region], with a total deal size of $25.7 billion across sectors,” he said.
Among the past year’s big ticket merger and acquisition deals in the non-banking sectors included the acquisition of Abu Dhabi Power Corporation’s energy and water generation, transmission and distribution assets by Abu Dhabi National Energy Company (TAQA).
Thomas said the UAE and Saudi were the leading countries for non-banking merger and acquisition activity during 2020, with total deals reaching $22.9 billion, involving primarily the industrials and energy sectors.
As for the Kalaam-Zajil deal announced early this month, Thomas said the acquisition is estimated to create a combined entity with revenue of $100 million, and infrastructure comprising data centres in five countries, network point of presence (PoPs) in 25 countries, and a subsea and land cable network that connects three continents.
The acquisition will enable Kalaam to become one of the three largest independent ISPs in the Middle East, and the only one with a regional presence in different countries.
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