The cooling world economy will drive the value of merger and acquisition deals down in the next two years to below 2018 levels, a new study found.
The value of M&A transactions across the globe is expected to fall to $2.9 trillion (Dh10.64tn) in 2019, down from $3.1tn this year. It is excepted to decline further to $2.3tn in 2020, the fourth Global Transactions Forecast, released by consultancies Baker McKenzie and Oxford Economics, said.
With some major initial public offerings scheduled for 2019, total IPO proceeds are projected to reach $232 billion, higher than the $220bn achieved in 2018, but sliding to $154bn in 2020, according to the report.
However, in 2021 and beyond, with borrowing costs settling at their neutral rates and equity markets enjoying better growth, Baker McKenzie and Oxford Economics see potential for the start of a new upturn in both M&A and IPOs.
"We remain cautiously optimistic about the year ahead, as we believe deal-makers will continue to take the long view in a world where sitting on your hands and waiting for the volatility to die down is not an option,” Paul Rawlinson, global chair of Baker McKenzie, said in a statement on Thursday.
“However, as we identified 12 months ago, there are still real threats to free trade and investment flows and there remains potential for a much more serious outbreak of protectionism and isolation that business, regulators and government must try and guard against," he noted.
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Read more:
Global M&A appetite ‘at four-year low’, says EY
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Within the Middle East and Africa, a recovery in oil prices has helped the hydrocarbon-dependent economies through 2018, although the global oil market has become more volatile heading into 2019. The continued gradual progress towards more diversified economies should help build confidence and deal-making from 2019 onwards in the Middle East, while in Africa signs of financial and economic stability will do likewise, according to the report.
The value of announced mergers and acquisitions in the Middle East and North Africa more than doubled to $10bn in the third quarter from a year earlier, amid expectations of slower activity in 2019, consultancy EY said in a November report.
The GCC accounted for 79 per cent of the value of announced deals and 73 per cent of deal volume in Mena. The number of big ticket transactions grew to eight from two in the year-earlier period because of increased participation of sovereign wealth funds and activity in the oil, gas and petrochemicals sector.
The biggest deal during the quarter was Saudi Aramco’s $1.6bn acquisition of Arlanxeo, a chemicals company in the Netherlands, according to EY.
Overall, McKenzie and Oxford Economics expect another strong year in North America in 2019, particularly if trade talks become less contentious and partisan, but with lesser activity expected in the second half of next year.
With the Eurozone economy entering a cyclical slowdown, the report suggested a further reduction in deal activity in 2019.
“In selected European economies including Spain and the UK, the market has remained robust and prospects for 2019 look fair, especially if, and it's a big if, Brexit is managed relatively smoothly.”
The%20Specs
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The%20specs
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The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
The%20specs
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BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
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Mica
Director: Ismael Ferroukhi
Stars: Zakaria Inan, Sabrina Ouazani
3 stars
The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
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Blackpink World Tour [Born Pink] In Cinemas
Starring: Rose, Jisoo, Jennie, Lisa
Directors: Min Geun, Oh Yoon-Dong
Rating: 3/5
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
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Company%20Profile
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Company%20profile
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
The Book of Collateral Damage
Sinan Antoon
(Yale University Press)