GCC realty sector posts most resilience in $8.9b M&A deals
6 Nov 2014
Source: Khaleej Times
By: Issac John – Associate Business Editor
Dubai: Led by a resurgent real estate sector, the GCC countries recorded $8.9 billion worth of merger and acquisition deals in the first nine months as the global M&A landscape posted an 11.7 per cent surge on the last full year during the first three quarters of 2014.
Following a post-crisis high in value and deal count during 2013, the GCC experienced reduced targeted M&A activity, said Mergermarket, the world’s leading intelligence and news service for mergers and acquisitions in its “Q3 2014 M&A Trend Report for the GCC.”
The total value of GCC deals in the first three quarters of 2014 has decline by 38.6 per cent compared with the same period last year, in which deal values totalled $14.5 billion, said the report.
The report released ahead of the “Saudi Arabia M&A & IPO Forum” in Riyadh said the reduced value of GCC transactions “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 per cent on the last full year.”
Global deals to the end of third quarter ($2.486.1 trillion) make 2014 the third highest annual value on record after 2006 and 2007, said the report.
The forum, which is to open on November 12, will focus on the prospects that exist for foreign investors in the region following the recent announcement by the Saudi Capital Markets Authority that it will be opening its markets to international capital.
The report noted that 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 in the first three quarters, ($8.9 billion), real estate accounted for 54.1 per cent, the report said.
Globally the energy, mining and utilities sector was in pole position ($423 billion) at the end of third quarter — up 35.6 per cent on the same period last year.
Beranger Guille, editor of Mergermarket, said the findings of the report “are surprising, particularly given the high volume and value of deals that took place in the GCC during 2013.”
Guille argued that the decline in value this year was 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 per cent from the same period in 2013.
Phil Gandier, Mena head of transactions at EY, Mergermarket’s lead strategic partner for the upcoming Saudi Arabia Forum, said 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 Kingdom of Saudi Arabia (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,” said Gandier.
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 per cent 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 third quarter of last year.