M&A Deals in Middle East Record 6 Percent Surge

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Merger and acquisition deals in the Middle East bucked global trends in 2020 to record a six percent surge as worldwide volumes for completed deals fell by nine percent compared to 2019, PwC said in a report released on Tuesday.

While the pandemic severely curbed M&A activity globally, dealmakers throughout the Middle East region adapted rapidly and imaginatively to the crisis, the report said.
 

“We are living in a new normal where businesses are having to rethink their strategies and navigate the uncertainty. It is important that they remain agile and re-evaluate their strategy since deals can no longer be put on hold,” said Romil Radia, regional deals markets leader at PwC Middle East.

The pandemic will continue to force businesses across many sectors to restructure and transform their operations in the years to come. “However, while it remains essential for dealmakers to factor in the current, uncertain environment, companies and investors should also view M&A as an opportunity to achieve their strategic objectives and it may be the best or fastest way to fill in gaps, for example, in technologies or resources,” said Radia.

PwC analysts see customer centricity, digital transformation and localisation of supply chains as some of the key factors which will influence the M&A strategy of businesses and investors across the region.

In 2020, overall, 235 deals were completed in the region, compared with 221 in 2019. More than half (117) of these deals were valued at less than $100 million, based on the 136 deals with disclosed values, with six deals worth more than $1 billion, said the report.

The report also seeks to explain how the market disruption caused by the pandemic has opened up new areas for dealmakers to explore.

Ovais Chhotani, deals partner at PwC Middle East, said “while there has been an increase in activity levels in H2-2020, deals are clearly taking longer to complete given the continued uncertainty and its resulting impact on valuations and deal structures.

“Going forward, expected consolidation across a range of sectors including those hit hardest by Covid-19, reallocation of capital across both public and private sectors, restructuring and/or digital transformation of certain businesses which has become critical in the wake of Covid-19 are what we see as some of the key themes that will shape the Middle East M&A landscape over the nearer term,” said Chhotani.

However, there is cautious optimism that the region is on a path to a recovery on the back of vaccination drive while recognising that challenges do lie ahead. “The shape of the recovery curve will vary considerably across the different sectors and investors need to carefully take this into consideration as part of their investment strategy,” said PwC report.