Middle East M&A drop during first half of 2020 amidst COVID-19

  • Overall global deal values down 31% from the previous half year, and 41% from H1 of 2019 which is the slowest first half for M&A since 2013
  • Overall Middle East deal values and volume drop by around 58% and 26% respectively from H1 2019
  • Total Middle East M&A deal values during the last two months of H1 2020 grew from USD 2.649 billion in H1 2019 to USD 33.501

Dubai, UAE, 04 August 2020 – 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.

About Baker McKenzie Habib Al Mulla

Baker McKenzie Habib Al Mulla brings over 30 years’ local know-how and extensive global resources to clients in the region, and is the only international law firm in the UAE with full rights of audience before all UAE and DIFC courts. We deliver unmatched on-the-ground support that reflects a deep understanding of local legal, regulatory and commercial practices. Our multidisciplinary team of 60 lawyers offers a full range of local and international legal advice across our offices in Dubai and Abu Dhabi, in both English and Arabic.

* Methodology – Cross-border M&A

The information in this press release is based on Refinitiv data for global announced M&A transactions with standard exclusions. We define cross-border deal-making as any M&A activity where the target is not in the same country as the acquirer ultimate parent, cross-regional (or interregional) deal-making as any M&A activity where the target and acquirer ultimate parent are based in separate regions, and domestic deal-making as many M&A activity where the target and the acquirer ultimate parent are based in the same country.

For the purpose of this report, the Middle East was defined as: Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, United Arab Emirates and Yemen. M&A activity refers to all deals ranked as at 30 June 2020.