Mergermarket: GCC Real Estate Shows Greatest Resilience in M&A Landscape
5 Nov 2014
Dubai, United Arab Emirates; 5th October 2014: Mergermarket, the world's leading intelligence and news service for mergers and acquisitions, has released its Q3 2014 M&A Trend Report for the GCC ahead of the 'Saudi Arabia M&A & IPO Forum', to take place in Riyadh on 12th November. The Forum will focus on the prospects that exist for foreign investors in the region following the recent announcement by the Kingdom's Capital Markets Authority that it will be opening its markets to international capital.
So far in 2014, the GCC has experienced reduced targeted M&A activity, following a post-crisis high in value and deal count during 2013. The total value of GCC deals in the first three quarters of 2014 has reduced by 38.6% compared with the same period last year, in which deal values totalled $14.5 billion. This decreased value is at odds with the global M&A landscape, in which the total value of deals for Q1-Q3 in 2014 was up 11.7% on the last full year. Global deals to the end of Q3 ($2,486.1 billion) make 2014 the third highest annual value on record after 2006 and 2007.
One GCC sector that has showed particular strength in 2014 is real estate. In the first three quarters of 2014 there have been five real estate deals in total - two more than during the same period last year. Of the GCC's total transaction deal value for 2014 Q1-Q3 ($8.9 billion), real estate accounted for 54.1%. Globally the energy, mining & utilities sector was in pole position ($423 billion) at the end of Q3 - up 35.6% on the same period last year.
Mr. Beranger Guille, Editor of Mergermarket, commented on the report:
"The findings of our report are surprising, particularly given the high volume and value of deals that took place in the GCC during 2013. The decline in value this year is partly explained by the lower number of deals that have actually been announced. However, with news that the CMA will be opening Saudi Arabia's market to foreign investment, and the upgrade of Qatar and the UAE to emerging markets on the MSCI Index, we expect to see growth in the region's transaction landscape in 2015."
Another reason identified by the report for the decline in deal value is that lower price-tags have been attached to GCC companies in 2014. The number of deals in the consumer sector has nearly doubled during the first three quarters of this year, but the $719 million accumulated by those deals represented a decline in value of 141.6% from the same period in 2013.
Mr. Phil Gandier, MENA Head of Transactions at EY, Mergermarket's lead strategic partner for the upcoming Saudi Arabia Forum, commented:
"With the revival of economic growth in the GCC and the surge in financial markets, there has been an overall improvement in investor confidence and deal activity has increased in consumption led sectors such as real estate and construction, consumer products and diversified industrials. The opening of financial markets is expected to translate into stronger deal flows and more M&A opportunities in the near future. The GCC markets and KSA in particular are luring international investors, with inbound deals comprising a third of all deals announced in KSA during 2014. Looking ahead, mid-market deals in consumption led sectors will continue to dominate the M&A landscape in the GCC in the future."
Mergermarket's financial advisor league tables currently rank Goldman Sachs at global number one in 2014, with a total deal value of $779.4 billion (up 30.5% on the whole of 2013). They are also number one by deal value ($6.839 billion) in the Africa & Middle East region. Investec top the Africa & Middle East table by deal count, with a total of 19 deals elevating them from ninth place in Q3 of last year.
The 'Saudi Arabia M&A and IPO Forum' will take place at the Ritz Carlton on 12th November 2014. Panel discussions and presentations will focus on 'Foreign Investment Prospects in a Challenging Regulatory Landscape', addressing recent investment trends in the Kingdom and providing a forward-looking analysis of the main deal drivers likely to be seen in the region over the next 6-12 months.