Robust economy, reforms to drive GCC M&A activity in 2024

Strong economic fundamentals, pro-investor business regulations and the wider government transformation agenda will continue to support deal-making prospects in 2024 in the region, in particular in the UAE, Saudi Arabia, Qatar and Bahrain, merger and acquisition (M&A) experts said.

Across the region, despite the global macroeconomic and financial headwinds experienced in 2023 M&A activity is being driven by the intensifying economic diversification and growth of non-oil sectors, rising private sector participation and robust capital markets activity, according to analysts at PwC.

According to the EY Mena M&A Insights 12M 2023 update, the Mena region witnessed a steady M&A market with total deal value for 2023 reaching $86 billion, indicating a 4.0 per cent increase on previous year. The GCC region accounted for the majority of deals at 565, valued at $83.2 billion.

The UAE reported the region’s largest M&A of the year with the announced acquisition of Univar Solutions by Apollo Global Management and Abu Dhabi Investment Authority (Adia) for $8.2 billion. This was followed by the acquisition of the US mobile games developer Scopely by PIF-owned Savvy Games Group for $4.9 billion, and the acquisition of the UAE’s Cent Holding by Blackstone and Adia for $4.7 billion closing the top three.

In its latest TransAct report, PwC said the impact of the global megatrends such as technological disruption, and climate change will continue to drive investment either regionally or outbound in key areas such as energy transition and digital transformation.

Romil Radia, regional deals Clients & Markets leader at PwC Middle East, said the M & A market has shown remarkable resilience, which has boosted investor confidence in the region and led to an increase in active deal-making. “We anticipate that 2024 will be a year of growth and activity will be driven by economic diversification goals, decarbonisation, and a focus on localisation and value creation, as organisations transform their business models and look to expand capabilities.”

Imad Matar, transaction services leader at PwC Middle East, said deal making has remained resilient in Saudi Arabia, given its keen focus on the national development agenda. “We see an expansion of activity in the non-oil private sectors, particularly infrastructure, industrial manufacturing, and clean technology industries. In 2023, Saudi Arabia saw less substantial declines in deal volume. IPO activity has also remained strong and we are confident that the region will continue to see a strong pipeline coming through in 2024.”

Another sector with significant potential for deal-making growth in 2024 is technology, with areas such as cybersecurity, cloud computing, and e-commerce well placed to attract investments. The Middle East’s active adoption of the digital revolution has further accelerated this trend, with countries like Saudi Arabia, UAE, Qatar and Bahrain, outlining economic visions that involve substantial adoption of advanced technologies, including Gen AI.

“We expect the positive momentum to continue as the government privatises state assets and encourages private sector companies to list in a bid to attract investment, push reforms and move away from dependency on fossil fuels,” said Matar.

In 2023, M&A activity remained buoyant as dealmakers shrugged off geopolitical tensions, rising cost of capital and general economic uncertainty in western markets. Domestic deals dominated the region in terms of volume at 49 per cent, while cross-border M&As contributed to 72 per cent of overall value. With companies seeking to gain strategic advantages on a global scale, cross-border deal value rose by 14 per cent y-o-y, according to data provided by EY MENA M&A Insights.

Sovereign wealth funds, such as Adia and Mubadala from the UAE, the Public Investment Fund from Saudi Arabia and Qatar Investment Authority), continued to lead the deal activity in the region to support their countries’ economic strategies.

• Business