Mena M&A deals jump 66% in 2021 amid economic recovery

The UAE registered the highest deal activity in terms of volume with 303 transactions, according to EY

The oil and gas sector had the highest activity in terms of deal values, driven by a stake sale by Aramco. AFP

The volume of merger and acquisition deals in the Middle East and North Africa surged 66 per cent last year as the region's economies charted a strong recovery from the coronavirus pandemic.

There were 661 transactions worth $99 billion last year, compared with 397 deals worth $85.2bn in 2020, according to Ernst & Young (EY).

The UAE experienced the highest deal activity in terms of volume with 303 transactions, while Saudi Arabia attracted the most M&A capital, worth $47.4bn, the consultancy said in a report. Egypt, the Arab world's third-largest economy, also saw robust deal activity in 2021 with 118 deals worth $7.7bn.

“In 2021, we saw a tremendous surge in Mena M&A activity as a result of improving post-Covid-19 market conditions,” said Brad Watson, EY Mena strategy and transactions leader.

“The recovery in oil and gas prices and an improving public health backdrop have also helped to lift the economic outlook in the region, leading to renewed confidence in regional boardrooms.”

Gulf economies grew 2.3 per cent in 2021 on the back of higher oil prices and fiscal stimulus measures, following a 4.9 per cent contraction the previous year when the pandemic began, Dubai’s biggest bank by assets, Emirates NBD, said in a recent report. The countries are forecast to grow 5.1 per cent on average this year.

The structural reforms carried out over the last two years, along with a much stronger fiscal position and recovering domestic demand, will support growth across Gulf countries this year and beyond, the lender said.

Domestic (intraregional) deals accounted for 55 per cent of M&A volumes in the Mena region last year, EY said. These deals increased to 366 in 2021 from 192 deals the previous year.

Meanwhile, the top 10 deals by value in 2021 cumulatively amounted to $58.8bn, accounting for 59 per cent of total deal value.

Government-related entities (GRE), including sovereign wealth funds and national oil companies, contributed to a total deal value of $62.6bn and accounted for 63 per cent of total disclosed M&A value in Mena last year, according to EY.

“Mena M&A activity in 2021 was unprecedented not just by sheer volume, but also because much of the deal-making was conducted virtually,” Anil Menon, head of Mena M&A and equity capital markets at EY, said.

“Furthermore, what makes 2021 remarkable is that the activity levels have been consistently good across sectors and geographies. We expect continued confidence and momentum in 2022.”

Private equity companies executed 165 Mena M&A deals in 2021 compared with 73 in 2020.

Some of the major M&A deals included Saudi Arabian food group Savola's acquisition of nuts company Bayara Holding for $260 million, as well as several deals by Abu Dhabi-based food and beverages company Agthia in confectionery and poultry, EY said.

The region registered significant M&A activity within the energy, resources and chemicals sectors in 2021, with several multi-billion dollar deals signed in Saudi Arabia.

The oil and gas sector witnessed the highest deal activity in terms of deal values, largely driven by a stake sale by Aramco in its natural gas pipeline business. In April 2021, a consortium led by EIG Global Energy Partners acquired a 49 per cent stake in Aramco Oil Pipelines Company for $12.4bn.

BlackRock and Hassana Investment signed a lease and leaseback deal with Saudi Aramco in December 2021 to acquire its gas pipeline network for $15.5bn.

The technology sector witnessed the highest deal activity in terms of deal volumes in 2021, according to EY.

Out of 43 inbound technology deals in the region, 20 were in the UAE.

“Looking ahead, Mena M&A activity in 2022 is expected to remain robust. Key deal themes include continued GRE investment, digitalisation and technology, and portfolio optimisation,” EY said.

About 64 per cent of Mena chief executives surveyed recently indicated that their companies would be pursuing M&A in the year ahead, an EY 2022 CEO Outlook Survey, which polled the views of more than 2,000 chief executives across the globe, said. Above-average M&A activity is likely to continue in 2022, the poll found.