During the second quarter of 2015, the MENA region’s mergers and acquisitions market reduced in size following a three year period of growth, according to a report by MENA Research Partners, a research outsourcing firm that offers a range of services to businesses throughout the MENA region. The report claims that the long term political instability throughout much of the region has led to a downturn in confidence among investors. The report claimed the market dropped by 29.4 per cent to $18.9 billion compared to the first half of 2014.
The total number of completed deals has been declining since 2009 and 2015 has, to date, seen a mere $3 billion worth of deals. While the number of deals has been decreasing, the average value of completed deals is still rising. The GCC continues to drive the market, the rest of the region accounts for a significantly smaller proportion of the market and countries such as Egypt and Morocco have realized continued surges. While the GCC accounts for 79% of the market value, deals outside the GCC are rising and this represents a continuing trend, also of note is the fact that more numerous, smaller deals are taking place outside of the GCC.
Lisa Wright, a director at mergers and acquisitions analytical firm Zephyr, said: “After a positive showing in the first quarter of this year, Q2 2015 has been disappointing in terms of aggregate deal value in the MENA region. In all 120 deals worth USD 2,883 million have been closed in the MENA region in the second quarter of 2015. The decline can be attributed to a lack of high value deals; in the period under review only one deal surpassed USD 1,000 million, a USD 1,100 million purchase of a 5 per cent stake in Abu Dhabi Company for Onshore Oil Operations by Inpex. This once again illustrates the difference a high-value transaction can make.”
In the first half of the year the banking, construction and service sectors continued to represent a significant proportion of the market, following on from 2014. In addition to the higher volume of smaller deals, the majority of deals were minority acquisitions, signaling that regional investors appear to be increasingly open to giving up control of businesses. Additionally, foreign players accounted for 49 percent of the deals in the first quarter of 2015, a slightly lower proportion than over the previous five years.