PwC’s Transact Middle East Deal activity slows down as caution prevails but some iconic deals completed in Q1 FY19
● 214 deals completed in 2018 compared to 267 in 2017. The slow down has continued into 2019 ● Private equity led activity has slowed but corporate acquirers are becoming more active ● Consolidation continues to be a major driver of M&A activity, especially in the banking and financial sector.
PwC’s second TransAct Middle East edition titled, “What’s shaping M&A in the Middle East?” shows a market decline in M&A activity from 2017 - 2018, with the total number deals decreasing from 267 in 2017 to 214 in 2018. Overall, M&A activity continues to remain slow in the current year, with 44 deals reported in Q1 '19 (vs. 56 deals in Q1' 18) and only 1 IPO reported in Q1’19 (vs. 4 IPOs in Q1’18). Private equity activity also saw a decline, dropping from 26% to 21% of all deals in 2018. Corporate acquirers however increased their share of deals from 54% in 2017 to 60% in 2018, with energy, financial services and healthcare among the most active sectors.
These figures reflect the generally bearish sentiments of Middle East business leaders as shown in our latest global CEO survey, where only 28% of the region’s CEO’s said they were “very confident” about their company’s revenue prospects over the next 12 months, compared with 35% among their global peers.
Romil Radia, Deals Client & Markets Leader at PwC Middle East, notes:
“Our 2019 TransAct Middle East report reveals a varied landscape across markets and sectors, with several prominent themes emerging despite macro-economic challenges and a slowdown in the 2018 deal market. He added:
“We are positive that inbound interest in the region will continue, as evidenced by some iconic deals that have marked the start of 2019, and ongoing interest in the energy/infrastructure sector. We expect to see a positive outlook in M&A activity for some sectors over the next 12-18 months.”
Another trend to look forward to is tech driven activity. We have already seen a number of deals completed in the sector in the last year and we expect this to continue going forward as businesses will look to acquisitions to expand their digital footprint in the region and protect their existing services and market share from start-ups or new entrants.
Ovais Chhotani, Transaction Services Partner at PwC Middle East says:
It is not surprising to see the number of completed deals down come down this year given where we are in the macro economic cycle. And this is to a large extent was driven by subdued financial sponsor activity. But we are clearly seeing corporates/family businesses looking at acquisitions more actively and this is understandable as organic growth slows down across a number of sectors. He added:
“We are seeing consolidation in the financial services sector and I won’t be surprised to see consolidation gathering momentum across certain other sectors. Interestingly, Egypt is back on the radar and offers some interesting opportunities for investors, particularly in the consumer facing sectors.”
For a full copy of the report please visit: http://pwc.com/me/transact