Middle East M&A drop during first half of 2020 amidst COVID-19 reports Baker McKenzie
Global M&A activity saw a decline in activity during the first half of 2020 (H1 2020) as total deal values decreased by 41% from H1 2019. The trend was reflected in the Middle East with total M&A deal values and volume decreasing by 58% and 26% respectively from H1 2019, according to the latest report by global law firm Baker McKenzie*.
Not surprisingly, deal activity globally has slowed significantly compared with H1 2019 due to COVID-19. The year started out a bit slow in January, but then picked up in February. However, when COVID-19 started to spread to the world in March, global deal volumes started a steep decline, which peaked in April with a 34% decline in volume and a 69% decline in value.
Middle East M&A activity
Despite this significant drop in Middle East M&A activity, there was a slight increase in total transaction values during the last two months of H1 2020 (May and June), from USD 2.649 billion in H1 2019 to USD 33.501. Deal-making overall in the Middle East was driven by high-value deals in H1 2020, such as ADNOC Gas Pipeline Assets’ USD 10 billion deal with Investor Group from the United States of America.
As for volume, Middle East M&A witnessed a decline in volume during the first half of 2020 with only 196 deals. The decline can be attributed to the volatility across markets around the world due to the global COVID-19 pandemic.
“COVID-19 has had a significant impact on M&As across the region,” said Omar Momany, Partner and Head of the Corporate M&A Practice Group at Baker McKenzie Habib Al Mulla. “However, the dramatic increase in the value of deals made during the final two months of H1 2020 showcases a positive outlook and an early recovery sign for M&A activity for the remainder of the year. As the world begins to emerge from COVID-19, we can expect markets to begin to bounce back leading to more opportunities for investment, distressed M&As and consolidation within the region.”
Cross-border M&A deal volumes and value both declined from H1 2019. The volume of activity fell from 163 to 132 and values decreased by 5.032 billion in comparison to H1 2019.
Cross-regional deal volumes also dipped in H1 2019 from the previous half year, but deal values increased by nearly a fourth, from USD 19.26 billion to USD 23.17 billion.
Inbound Cross-regional Middle East M&A
While the volume of deals into the Middle East ebbed slightly in H1 2020 from the previous half year, inbound deal values jumped from USD 13.848 billion to USD 15.753 billion in the same period.
In cross-border deal making, the US remained the top target and acquiring country by value and Hong Kong was the top Asian acquirer also based on value of deals. As for volume, India was the top target country with 10 deals followed by US with 8 deals and United Kingdom 4.
Energy & Power was the top target industry by value, with four deals valued at USD 10.1 billion in H1 2020, significantly higher than the value of High Technology, which ranked first in volume with nine deals valued at USD 193 million.
Outbound Cross-regional Middle East M&A
Outbound M&A activity from the Middle East into other regions dropped by volume but increased in value, from 103 deals valued at USD 5.421 billion in H1 2019 to 78 deals valued at USD 47.417 billion in H1 2020.
The US was the top target country for outbound deals in both volume and value, benefiting from 27 deals valued at USD 3.567 billion. Egypt was the second most popular target country by volume and value with 10 deals valued at USD 2.640 billion, while the United Kingdom ranked third by volume and value.
As an industry, Industrials ranked top by volume for H1 2020, with 16 deals, closely followed by the Real Estate sector with 12 deals. The Telecommunications industry led by value featuring announced megadeals such as the potential Vodafone Egypt Telecommun SAE/ Saudi Telecom Co. Sjsc USD 2.392 billion deal.