62 percent hike in merger and acquisition deals in Qatar

By Peter Alagos/Business ReporterThe number of Qatar’s merger and acquisition (M&A) deals in 2014 has increased to 13 compared to eight deals transacted in 2013, activity which is likely to continue in 2015 despite the drop in oil prices, KPMG global head of Deal Advisory Leif Zierz told Gulf Times.“We currently have a favourable environment for transactions activity across the globe,” Zierz noted.He added, “In terms of number of transactions, Qatar is obviously a small market, but there has also been a strong increase in deals activity, even stronger than the rest of the Middle East, and the rest of the region. However, the rest of the region has also shown itself very strong.”Based on data compiled by Thomson One, KPMG figures revealed that the average ticket size of the completed deals in 2014 was $61mn as compared to $667mn in 2013.The high average ticket size of the completed deals in 2013 came from two large transactions in the real estate domain, which includes acquisition of Barwa Commercial Avenue with a deal value of $2.4bn and acquisition of Barwa City Real Estate with a deal value of $2.081bn.According to Venkatesh Krishnaswamy, partner at KPMG in Qatar and head of the firm’s Deal Advisory practice, massive infrastructure spending related to 2022 FIFA World Cup preparations and Qatar National Vision 2030 has sustained M&A activity here.“Qatar could see some big prioritisation of its projects such as core infrastructure projects that it has committed to deliver. Also, common sovereign backing is there and that would encourage more private sector participation into some of these projects, but I think the committed spend will be delivered,” Krishnaswamy explained to Gulf Times.But he also underscored the need for more joint ventures (JVs) between Qatari companies and international firms to push M&A activity.“Qatar may need more in terms of joint ventures where Qatari companies look to build capacity and capability to be able to take on some of these larger projects and some of these larger assets and operate them when they come to life,” Krishnaswamy said.He added, “That’s where I see activity coming in from cross-border where international companies have the technology and the capability, while local Qatari companies do not necessarily, in the past, have the opportunity to build, manage, or operate some of these large infrastructure facilities.”Krishnaswamy also stressed on the role of “soft infrastructure” such as education and healthcare where, according to him, “There is an urgent need for capacity building.”“It’s one thing to have the money to build the hard infrastructure but it’s quite another thing to come down and operate those assets,” he explained.Ramachandran Narayanan, KPMG partner and head of Deal Advisory for the Middle East and South Asia, said a lot of infrastructure has been created in Qatar, which, over the next five years, would continue to be built and need to be operationalised.“Whether you’re running a rail or a series of infrastructure being created, there will be a lot of new expertise that needs to be brought in. That is where the opportunity for joint-ventures becomes essential to bring in technology expertise and skills to be blended with Qatar when things will happen,” Narayanan said.He added, “And the scale of that will also change over the next five to seven years. You will see a lot of that coming whether it is through the construction phase, moving to an operation phase, or maintenance phase. While that’s in the next 10 years, some of these things will start to play out.”Zierz also said there was an increase in Qatar’s outbound transaction, as he underscored the role of the real estate sector.“Qatar is a very important outbound investor, investing significant funds globally. This follows a wish of diversifying into other sectors so Qatar, specifically, is a very important real estate investor across all the significant deals,” Zierz said.According to KPMG data, Qatar-based companies executed a total of 26 outbound transactions in 2014 (completed deals). Based on disclosed values, these transactions amounted to $3.9bn, representing a 176% increase from the $1.4bn in 2013 from 14 outbound completed deals.Overall, KPMG said M&A activity remained strong across the Middle East in 2014, however, Qatar saw a bigger percentage increase in M&As than fellow GCC members Kuwait, Saudi Arabia and the UAE.From 2013 to 2014, the number of completed inbound transactions in Qatar increased by 63%, from eight to 13 deals, compared to 20% in Kuwait, a 7% decrease in the UAE, and a 23% decrease in Saudi Arabia.Qatar’s number of completed outbound transactions rose by 85% in 2014, from 14 to 26 deals, compared to 38% in Saudi Arabia, 12% in the UAE, and an 18% drop in Kuwait.Mirroring the increase in the number of deals, the total deal value of completed outbound acquisitions in Qatar rose from $1.44bn in 2013 to $3.98bn last year.