GCC to lead the Mena region in mergers and acquisitions transactions in 2024

The momentum transcends traditional sectors, with robust deal activities observed in established areas

By Salmaan Khawaja

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The Abu Dhabi Investment Authority headquarters. — File photo
The Abu Dhabi Investment Authority headquarters. — File photo

Published: Thu 6 Jun 2024, 7:02 PM

Last updated: Thu 6 Jun 2024, 7:45 PM

Mergers and acquisitions (M&A) activity in the Middle East and North Africa (Mena) region maintained strong momentum throughout 2023, reaching a total deal value of $86 billion, even as global M&A activity decreased by 15 per cent during the same period.

The GCC region dominated, representing 97 per cent of the total deal value. Despite facing challenges from geopolitics, the region exhibited remarkable resilience, largely attributable to effective governance by individual country governments.

The UAE and Saudi Arabia have emerged as beacons within the GCC, attracting substantial capital thanks to proactive government policies aimed at economic diversification beyond oil, fostering a fertile ground for investment. This strategic approach, bolstered by the financial strength of Sovereign Wealth Funds (SWFs) and active family offices, has propelled a surge in both domestic and cross-border M&A activities.

The momentum transcends traditional sectors, with robust deal activities observed in established areas such as real estate, hospitality and infrastructure, alongside growing sectors aligned with global trends such as technology, renewable energy, and healthcare. This diversification, coupled with increased outbound investments, a regional tourism boom, and continued infrastructure development, positions the GCC not only to retain its leadership in Mena M&A, but emerge as a prominent force in the global M&A market in 2024.

Increased outbound investments

The GCC is witnessing a surge in outbound investments, indicative of its strong economic performance and growing investor confidence. SWFs such as the Abu Dhabi Investment Authority (ADIA), the Public Investment Fund (PIF) of Saudi Arabia and the Qatar Investment Authority (QIA), alongside prominent investment holding entities like Mubadala, Dubai Holding, ADQ, and Alpha Dhabi, have been leading this trend, consistently driving deal activities within the Mena region.

Additionally, the GCC’s domestic M&A market remains buyout, reflecting overseas investor confidence in the region’s growth prospects and maturing business environment. This is evident in deals such as Brookfield Business Partners’ acquisition of UAE-based payments-processing company Network International for £2.2 billion ($2.76 billion), as part of its Middle East expansion.

The GCC tourism landscape in full bloom

In 2023, the GCC region experienced a significant rise in tourist activities, highlighted by Dubai’s Department of Economy and Tourism (DET) reporting a record 19.4 per cent year on year growth in international visitors, surpassing pre-pandemic levels. This influx not only bolstered the hospitality sector but also drove significant growth in the dynamic Food and Beverage (F&B) industry. Recognising the vast market potential, investors, including private equity firms, are actively investing in the F&B landscape, leveraging trends such as sustainability, immersive dining experiences, and an increasing focus on local sourcing and robust food security infrastructure, catering to the evolving preferences of tourists and residents alike.

Salmaan Khawaja, Partner - Head of Financial Advisory, Grant Thornton UAE.
Salmaan Khawaja, Partner - Head of Financial Advisory, Grant Thornton UAE.

With the influx of both tourists and investor capital, the market is ripe for M&A in 2024. Notable examples include the acquisition of Black Spoon Group by KSA-based Jadwa Investment and the acquisition of Sushi Samba restaurant by investment firm Shamal Holding. As organisations seek to deploy capital and sellers look to sell after a hiatus, there are continued signs of positivity in the market. This positivity is exemplified in transactions such as ADQ-backed Silal’s majority acquisition of SAFCO group, a leading F&B distributor, to fortify its supply chain as part of its food security agenda.

Investment in infrastructure beyond bricks and mortar

The GCC is leveraging M&A to bolster its infrastructure beyond traditional sectors. Healthcare advancements are further propelled by deals like ADQ’s acquisition of Aster DM Healthcare, a leading healthcare provider. Similarly, the education sector witnessed the consolidation of institutions forming Khalifa University in Abu Dhabi. Renewable energy is gaining significant traction, with strategic acquisitions playing a key role. For instance, BlackRock agreeing to invest up to $400 million in Dubai-based decarbonisation company Positive Zero, a decentralised decarbonisation infrastructure business, demonstrates the region’s commitment to clean energy solutions, boosting energy transition projects in Gulf countries.

This strategic focus on healthcare, education, renewable energy and traditional infrastructure, facilitated through M&A activity, positions the GCC not only to attract talent, foster innovation, and solidify its regional leadership in infrastructure development, but also lays the foundation for it to become a global powerhouse across all fronts.

2024 outlook

Building on a strong 2023, the GCC’s M&A landscape in 2024 exudes optimism. Flush with capital, SWFs, family offices, and corporations are eager to deploy resources. This strong appetite is evident in the strong deal activity witnessed in Q1 2024, with a significant number of deals underway and the promise of more to come. This momentum, coupled with a positive economic outlook, positions the GCC as a major player in the Mena region’s M&A landscape.

The writer is Head of Financial Advisory, Grant Thornton UAE.

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