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Value of M&A in MENA drops 54% in Q3: E&Y

JEDDAH - Mergers & acquisitions (M&A) deals in the Middle East and North Africa region dropped by 54 percent in value to $7.14 billion in the third quarter of 2009 compared to deals worth $15.64 billion announced in the same period last year, Ernst & Young’s quarterly Middle East update said on Monday.
M&A activity has also fallen 26 percent in terms of the actual number of announced deals. A total of 97 deals were announced in the third quarter of 2009 against 134 in the third quarter of 2008. Within these disclosed deals, the number of outbound deals was down from 42 in Q3 2008 to 25 in Q3 2009, a drop of 40 percent, while domestic deals fell from 75 to 53. However, the number of inbound deals increased marginally from 17 in Q3 of last year to 19 in the third quarter of 2009 - an increase of 12 percent.
The value of the domestic deals dropped by 60 percent from $6.3 billion in Q3 2008 to $2.55 billion in Q3 2009 and the value of outbound deals also fell by 54 percent, from $8.95 billion in the third quarter of last year to $4.15 billion in the same period in 2009.
Average deal size also fell from $184 million in Q3 2008 to $166 million in Q3 2009. Deals with size greater than $500 million have dropped from 9 percent to 7 percent in value terms during the same period.
The update reveals that deals less than $100 million decreased marginally from 64 percent in Q3 2008 to 63 percent in Q3 of 2009.
An increasing trend was observed toward medium sized deals (deals valued between $100-500 million) which rose from 27 percent in the third quarter of 2008 to 30 percent in the same period in 2009.
Phil Gandier, head of Transaction Advisory Services at Ernst & Young Middle East, said: “Saudi Arabia topped the country charts for the number of M&A deals with 14, followed by the UAE and Kuwait, both at 11. Jordan and Egypt had 10 and 8 deals respectively. The top sectors were banking and financial services and diversified industrial products, both with nine deals followed by oil & gas with eight and asset management with seven deals.”
UAE-based Advanced Technology Investment Company’s acquisition of Singapore-based Chartered Semiconductor at US$1.8 billion was the largest deal in Q3 2009. This was followed by a Moroccan domestic transaction wherein RMA Watanya, Fipar Holding and FinanceCom acquired Medi Telecom for $1.13 billion.
He added: “The number of domestic transactions comprised almost 55 percent of the total M&A activity followed by inbound and outbound deals at 25 percent and 20 percent respectively.”
The continued easing up of liquidity in the regional marketplace has the potential to reverse the declining trend in domestic and outbound deals.
Regional companies are also looking to focus on core competencies that could see them shedding non-core assets to regional or foreign buyers. The coming year will see regional companies shake off the impact of the global downturn, sell their under-performing assets and then look for acquisitions in areas of their core competence. – QJM
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