Global cross-border merger and acquisition activity continued to dip as political turbulence and economic uncertainty become the new normal for dealmakers, whilst deal flow in the Middle East remained stable, according to Baker McKenzie's Cross-Border M&A Index.
The first quarter of 2017 Middle East Index has remained fairly steady at 141.3, a slight dip on first quarter of 2016 figures (155.6), and the previous quarter (189.9), indicating that despite sustained political and economic uncertainty, the Middle East M&A market remains steadfast.
The UAE is yet again a dominant country for M&A in the region this quarter, coming out top for deal volume for both inbound and outbound activity.
"The UAE is one of the most dynamic Middle East economies for cross-regional M&A activity, as borne out by the deals in first quarter of 2017," said Will Seivewright, corporate/M&A partner at Baker McKenzie Habib Al Mulla, based in the UAE.
"With projected gross domestic product growth continuing to bring investors to the region, the outlook is very positive for the remainder of the year. We expect to see the consumer and technology sectors driving activity as demand and innovation in the region continue," he said.
Zahi Younes, corporate and securities partner at Baker McKenzie's associated firm in Riyadh, said it's a positive story for Saudi Arabia this quarter, with the nation leading the pack on both outbound and inbound deal value.
"As 2017 continues, we expect to see more deal activity from family businesses as second- and third-generation shareholders become more receptive to M&A activity as a means to develop their businesses," he added.
Inbound Middle East M&A
Both the value and volume of cross-regional M&A deals targeting the Middle East slightly increased from the last quarter, rising from $2.66 billion to $2.96 billion, and shows a significant increase from first quarter of 2016 where we saw just $349 million raised for the same number of deals.
The US led by volume and value as the top bidder country for the quarter with two deals worth $2.86 billion, one of which was Tronox's $2.21 billion acquisition of Saudi Arabia's National Titanium Dioxide Company, resulting in the chemicals and materials sector being the stand out target industry for the quarter by value.
The UAE attracted the most interest from international investors by volume, with four deals across various sectors, whilst Saudi Arabia led by value, as a result of the Titanium Dioxide mega deal. The energy and utilities sector was the busiest of the quarter.
Outbound Middle East M&A
The value of outbound M&A from the Middle East in the first quarter of 2017 has more than halved compared to the fourth quarter of 2016. However, a year-on-year comparison shows that deal value has more than doubled from $1.13 billion in first quarter of 2016, to $5.21 billion in the first quarter of 2017, despite a 50 per cent drop in deal volume.
The UAE drove deal volume from the region, with five deals across various sectors, whilst Saudi Arabia and Kuwait account for the main bulk of this quarter's deal value, investing $3.9 billion and $1.2 billion, respectively.
Energy and utilities was the stand-out target industry by both volume and value, with six deals valued at $5.12 billion, including the mega $3.9 billion acquiring of the US' Motiva Enterprises by Saudi Arabian Oil Co.