Global M&A deal-making in 2017 stayed in line with 2016 levels, with overall global deal volumes rising slightly by three per cent and flat growth in terms of value, and Middle East activity rallied in the last quarter of the year, according to the latest report by global law firm Baker McKenzie.
Despite tighter scrutiny on foreign deals, the United States (US) was both the most acquisitive and targeted region globally in Q4 2017, with 569 outbound deals valued at $60 billion and 506 inbound deals valued at $78 billion. In Europe, cross-border activity involving the United Kingdom continued to take a hit in the wake of Brexit developments and elections in the region, with a decrease in both volumes and values compared to Q3 2017. In Asia, China outbound deal-making slowed down at the close of year as a result of the regulatory crackdown on overseas deals, while Japan inbound and outbound deal values dropped significantly from the previous quarter by 87 per cent and 73 per cent respectively.
Middle East M&A activity
Total Middle East deal volumes fell 10 per cent in 2017, compared to the previous year, with deal values also declining by 31 per cent. Nevertheless, overall deal activity rallied in Q4 2017, with deal volumes up eight per cent and aggregate value up by 21 per cent at $6.6 billion compared to the previous quarter. Cross-regional M&A deal volumes also increased by eight per cent, while deal values increased by 85 per cent from Q3 2017, driven by the $1.06 billion acquisition of Kuwait’s National Petroleum Services Co. Eighty per cent of all Middle East M&A activity was cross-border in nature in Q4 2017 and the United Arab Emirates (UAE) once again drove both inbound and outbound M&A in the region.
“Despite overall deal activity in the Middle East decreasing in both value and volume in 2017, the rally witnessed in the last quarter of the year was very positive. The increase in cross-border M&A deals by value and volume in the last quarter of 2017 reflect the sustained investor appetite in the Middle East,” said Omar Momany, Head of Corporate/M&A at Baker McKenzie Habib Al Mulla, based in the UAE.
Inbound Cross-regional Middle East M&AThe value of cross-regional deals targeting the Middle East increased significantly by 194 per cent to $1.9 billion in Q4 2017 from $630 million in the previous quarter, driven by the National Petroleum Services acquisition. Deal volume also rose by 35 per cent, with a total of 31 deals during the same quarter.
The UAE was the top target country for inbound deals by volume in Q4 2017, attracting 15 out of 31 deals, valued at $516 million, while Kuwait was the top target country by value, with $1.2 billion from three deals. The US was the top bidder country both by volume and value during the same quarter, with six deals valued at $1.2 billion.
The Energy & Power sector was the most active sector in respect of inbound Middle East investment, both by volume and value in Q4 2017, registering seven deals amounting to $1.3 billion.
“We expect regional deal activity to remain fairly consistent in the coming years, with particular interest in the consumer-facing, infrastructure and technology sectors driven by the demand for innovation and new business models,” commented Will Seivewright, Corporate/M&A Partner at Baker McKenzie Habib Al Mulla, based in the UAE.
Outbound cross-regional Middle East M&ABy value, outbound cross-regional deals from the Middle East increased by 52 per cent in Q4 2017 to $2.3 billion compared to $1.5 billion from the previous quarter. However, this was generated from 37 deals, representing a 10 per cent decline in volume from Q3 2017.
The UAE was the top bidder country both by volume and value, comprising more than half of the total outbound M&A activity, with 19 of the 37 deals originating from the Middle East amounting to $1.07 billion.
The top target countries for outbound M&A by volume included the United Kingdom, United States, Spain and Italy with three deals each, while India was the top target country by value, with two deals valued at $1 billion, including the acquisition of the Indian unit of National Investment & Infrastructure Fund Ltd by the Abu Dhabi Investment Authority.
The Industrials sector was the most active sector both by volume and value of deals originating from the Middle East, with a total of 10 deals valued at $1.03 billion.
Zahi Younes, Corporate/Capital Markets partner at Baker McKenzie’s associated firm in Saudi Arabia, added, “Unprecedented economic reforms, openness to foreign investment and future infrastructure requirements in the Middle East are going to present enormous opportunities in the medium and long term and continue to sustain levels of regional M&makrA activity.”