Fast-growing Qatar, which has embarked on diversification, emerged topper in the Middle East outbound merger and acquisition (M&A) by value in 2016, mainly on account of its sovereign wealth fund-led consortium’s multi-billion dollar investments in Russian oil company, according to Baker McKenzie.
“Qatar topped the full-year 2016 by value with deals worth $13.35bn, driven by the $11.27bn investment in Russia’s Rosneft Oil Company by a consortium led by Qatar Investment Authority,” Baker McKenzie Habib Al Mulla said in a report.
The Rosneft deal value alone constituted more than 84% of the total deals value in 2016, it said.
However, the UAE drove four of the top five outbound M&A deals by value during the fourth quarter (Q4) in 2016, it said.
The report found that outbound cross-regional M&A deals fuelled by the Middle East totalled 74 in 2016 (compared to 72 in the previous year) with the UAE constituting 36 transactions, followed by Qatar and Bahrain with 16 and 9 deals respectively.
The top sector by value for 2016 outbound Middle East M&A was the energy and utilities sector with $12.2bn worth deals, and the top sector by volume was the consumer sector with 12 deals.
The Middle East region saw robust cross-border M&A, particularly on inbound deals, even as the global M&A activities were on the decline in 2016, the report said.
Despite being a long way off Q4 2015’s record-breaking Middle East Index figure of 591.5, the Q4 2016 Index of 181.6 doubled that of the third quarter (91.2) and underlined the continued strength of cross-regional M&A activity in the region, with the UAE as the dominant country for both inbound and outbound deals in Q4 2016, it said in a report.
“Cross-border M&A activity in the Middle East has seen a robust year of deal making in spite of investor uncertainty and market instability,” Will Seiverwright, Corporate/M&A partner at Baker McKenzie, said.
The “remarkable” increase in cross-regional transaction value and steady flow of deals for 2016 bodes well for M&A in the coming year, according to him.
George Sayen, Head of Corporate Practice Group at Baker McKenzie’s associated firm in Riyadh, said cross-border M&A in the region has fared relatively well in 2016, notwithstanding global political and economic volatility.
“Looking forward, we expect Saudi Arabia’s Vision 2030 to generate considerable deal activity in specified sectors such as technology, healthcare, education and transport,” he added.
The value of inbound Middle East M&A deals more than doubled year-on-year to $10bn in 2016 mainly on a few mega deals in the transportation and energy and utilities sectors. Inbound cross-regional deal volumes, however, remained flat at 29 in 2016.
The UAE was the standout target country by volume for both Q4 and full-year 2016 with 18 of the 29 deals in 2016, followed by Oman with three deals and Saudi Arabia with two. On the other hand, Kuwait was the top target country by value for 2016 with Hapag-Lloyd’s $5.4bn acquisition of Kuwait’s United Arab Shipping Company. The Transportation sector was top by value for 2016, with deals valued at $5.53bn, and the energy and utilities sector was top by volume for the year, with six deals valued at $3.6bn, the report said.