Bain & Company’s fifth annual Global Mergers & Acquisitions report highlights the increase in Middle Eastern M&A activity driven by sovereign wealth funds seeking to establish local leaders through these deals. The report states that this strategy will strengthen partnerships, provide investments for the future, and boost the region. The report also noted a 39% surge in regional M&A activity in 2022, mostly driven by government-owned sovereign wealth funds, with these funds and corporations being responsible for 84% of the deals, and private equity investors playing a smaller role.
“With a strong economy buoyed by high oil prices, the Middle East is well positioned to rely on M&A to further advance the region’s long-term push to expand beyond hydrocarbons as well as globalise its companies,” the report noted. “These are good times for the local economy, with expected regional GDP growth of 6.5% (7.6% in Saudi Arabia), the highest it’s been in more than a decade. The Middle East’s sovereign wealth funds are growing, too, and with a new government mandate, they have become a treasure chest for much of the M&A activity.”
According to the report, the Public Investment Fund (PIF) of Saudi Arabia will invest $1.3B in four Egyptian businesses in August 2022, including Alexandria Container and Cargo Handling and Abu Qir Fertilizers. However, there is less private equity activity in the area and it has decreased by 36% in the first ten months of 2022. However, there are some indications that companies preparing for IPOs, which are booming, are resuming their interest, according to Zawya. Companies are acquiring businesses or forming alliances to saturate regional markets in critical industries, as seen in the cooperation between Etihad and Air Arabia and the agreement between Saudi British Bank and HSBC Saudi Arabia.
Meanwhile, regional companies are expanding internationally through cross-border M&A or overseas investments, Bain & Company said, citing Abu Dhabi’s FAB merged its Egyptian operations with Bank Audi Egypt, creating one of Egypt’s largest banks, as an example. “In the years ahead, we expect more international companies will explore the cross-border possibilities of partnering with sovereign wealth funds and local authorities to create new sectors through joint ventures,” Bain & Company added.
