GCC M&A Volumes to Reach $25bn in 2010
Tuesday, May 04, 2010
The most bullish of the GCC’s leading investment banks are predicting a solid bounce-back for regional M&A in H2 2010 with some suggesting volumes could reach US$100bn in 2011
Gulf M&A activity shows its first signs of life after a painful two years marked by cost cutting and balance sheet repair. The first GCC M&A Barometer interviewed 27 of the leading international and regional investment banks. The survey was conducted by Zawya, the leading online business and investment platform in the Middle East and M:Communications, the international financial communications agency.
More than 80% of the investment banks expect the downward trend since 2007 to reverse in 2010, with total M&A value to reach $25bn. Looking further ahead, a significant proportion of the participants surveyed are bullish on their outlook for 2011. Some of those questioned expect GCC M&A volumes to hit the $100bn mark for 2011.
Historically, GCC M&A has constituted up to 10% of global M&A activity. To date this year it has reached only 4%, compared, for example, to Europe’s 15% share. However, led by the $10.7bn deal between India’s Bharti Airtel and Kuwait’s Zain for the latter’s Africa services, the M&A sector now has an air of cautious optimism as key corporates’ first quarter earnings show a return to double digit growth. The sense is that chief executives are now seeking growth through acquisition strategies.
The findings of the GCC M&A Barometer point away from distressed sectors such as real estate and focus on key industries such as healthcare, financial services, energy, and basic materials. Geographically, the majority of M&A are expected to take place within the GCC area, with Saudi Arabia leading the UAE and Qatar. Eighty-five percent of bankers expect mid-market transactions to dominate the M&A market in 2010.
The GCC M&A Barometer also confirms a number of critical barriers to increased M&A activity in the region: a continuing disconnect between corporates’ own growth expectations and those of the market; “chief executive’s egos” - management don’t want to lose power; and a lack of liquidity as most deals are expected to be financed through a combination of debt and equity.
Commenting on the survey, Jean Marc Paufique, Head of Zawya’s Professional Investment Division, said, “It does appear that the corner has turned with a large majority of our panel of leading bankers from both international and local firms forecasting a significant increase in M&A activity for 2010 with further acceleration in 2011.”
Nicholas Lunt, Gulf Managing Director of M:Communications, added, “There is still a long way to go before we return to the heady days of the mid-decade, but the worst is certainly over with a strong desire of those who are fit and able to take advantage of favourable valuations to get ahead in the consolidation race.”
The report is available from http://www.zawya.com/gccbarometer/
For more information, including media interview requests please contact:
Jean Marc Paufique, Zawya, +971 4 363 5660:
Nicholas Lunt, M: Communications, +971 4 325 9675:
Zawya focuses on the developing business and investment environment in the Middle East. The company provides professionals with the means to identify, assess and monitor business and investment opportunities in both the public and private markets. Thousands of premium members use Zawya's information resources, technology applications and online network to better connect to opportunities across the GCC, Levant, Iraq and North Africa. Headquartered in Dubai, Zawya also has presence in Saudi Arabia, Bahrain and Lebanon. For more information, visit www.zawya.com
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