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Middle East and North Africa merger market remains strong despite oil price volatility, says report


The number of corporate merger and acquisition (M&A) deals taking place in the Middle East and North Africa (MENA) increased by 6% last year, and the trend seems likely to continue despite oil price volatility affecting economic activity in the regions, according to new analysis.

In its final quarterly update for 2014, professional services firm EY said that "strong market fundamentals" were behind the increase, from 442 deals in 2013 to 468 deals in 2014. However, the value of those deals that were publicly announced decreased by 11% over the same period, from $50.7 billion in 2013 to $44.9bn in 2014, according to the figures.

Phil Gandier, EY's head of transaction advisory services for MENA, said that some "large ticket consolidations" in 2013 had pushed the total value of M&A deals for that year higher than usual. The MENA market performed "very well" in 2014, particularly over the last three months of the year when 150 deals with a combined value of £16.2bn were announced, he said.

"The growth of MENA M&A is expected to continue in 2015 at a normalised year on year growth rate of up to 10%," he said. "The majority of MENA M&A transactions tend to occur in consumption-led sectors such as food and beverage, retail, healthcare and education, which have little correlation to economic activity and changes in oil price, so the positive trend is expected to continue."

"The total number of MENA deals in 2015 is expected to range from 400-500, continuing the same trend that we've seen in the past few years. We expect to see a lot of private equity (PE) deals in particular as an increasing number of PE firms will be seeking exits from their investments," he said.

Corporate law expert Osama Hassan of Pinsent Masons, the law firm behind Out-Law.com,  said: "We saw an increase during 2014 in deals involving the healthcare, education and retail sectors. The slowdown in IPO activities is likely to result in investors looking for deals within the region and we expect that the UAE and Saudi will have the largest share of the deals in 2015".

EY's MENA M&A and IPO leader Anil Menon said that much of these deals would likely be "outbound" in nature, with investors based in the MENA region targeting companies outside of it. The value of MENA outbound deals increased by 19%, to $22bn, over 2014 while domestic and inbound deal values decreased by 31% and 24% respectively over the same period, he said.

"With the exception of 2013, which saw domestic deal value exceed outbound deal value, outbound deals have historically been the most popular option for MENA investors," he said. "We expect investors to continue looking outside the region for investment, particularly in sectors such as real estate and oil and gas."

"The UAE dominated as the target country with the largest number and value of inbound deals in MENA which points to the strong confidence of international investors in the UAE's potential. Egypt also came back into the deal market with a vengeance in 2014 with many multinationals investing in Egypt. The return of investments into Egypt signals that international companies are willing to bet on the long term future of Egypt as they see stability improving," he said.

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