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Sunday, April 11, 2021

Khaleej Times - MEA records 52% jump in M&A activity in Q1

Khaleej Times - MEA records 52% jump in M&A...

Vijay Valecha , Special to Khaleej Times April 11, 2021

The Middle East and Africa (MEA) region has recorded a strong performance in Mergers and Acquisitions (M&A) activity during the first quarter. The latest report from M&A data from Mergermarket shows that following a strong end to 2020, M&A targeting MEA had an active first three months of 2021, reaching a total $32.7 billion across 110 deals, indicating a 52 per cent jump in comparison to the equivalent period in 2020 ($21.5 billion, 85 deals) with 25 more deals conducted this year.

Foreign investment into the region has been key to the increase in the opening quarter, with inbound activity reaching $24.7 billion across 52 transactions in first quarter of 2021. This represents the highest quarterly inbound value since fourth quarter of 2007 ($26.2 billion) and accounts for 75.6 per cent of the total MEA M&A value so far this year.

The latest data suggests that tech has remained the most active sector in the region by both value and volume, jumping to $14.7 billion (31 deals). Three of the region’s ten largest deals targeted the tech sector. The energy, mining, and utility sector has also seen an increase in both value and volume, reaching $4.6 billion across 18 deals so far this year.

In line with global activity, there has been a surge in private equity dealmaking in the region in the opening quarter of 2021 with an increase in both buyouts and exits. Sponsors deployed a total of $18.3 billion across 26 buyouts in first quarter, which represents the region’s highest quarterly buyout value and volume on record.

“The Mena region witnessed a new record of investment in the first quarter which was driven mainly by the tech sector growth as the population moved to adopt digital solutions. The improving market conditions, increasing scope of growth and Special Purpose Acquisition Companies (SPACs) looking to invest capital led to to a stellar MEA M&A value so far this year. The M&A recovery that began in the second half of 2020 and has accelerated in 2021, as investors have access to capital and pursing to expand the scope,” said Vijay Valecha , CIO, Century Financial.

“Moreover, in 2021 countries have realised smart cities’ potential, and have started envisioning an eco-friendly world. The Mena private capital investments this year have rebounded and the capital assets under management are expected to see a rise of over 11 per cent CAGR by 2025. The estimated forecast reflects the restoration of investor confidence in the region,” concluded Valecha.

Globally, M&A volumes are on the pace to rise 43 per cent year on year and first quarter of 2021 has witnessed M&A transactions to the tune of $0.93 trillion.

The start of the new M&A cycle is just warming up and five trends that could characterise a robust market this year could be: supportive markets with low capital costs; rebound in sectors impacted by Covid-19; companies increasing scale and acquiring technology; recovery in cross-border M&A; and abundant capital from private equity and SPACs.

“The SPAC concept will gain further momentum and traction in the year 2021 and 2022 that will provide further boost to M&A activities in the region and globally. Abundant capital is available with private equity investors to invest in companies through SPAC structures,” said Dhaval Jasani, founder and chief executive officer at ZTI.

“The world faced reset mode in March 2020 and dynamics of every business changed suddenly and so did valuations, given this reset. Mergers from thereon have seen a upside. It is ideal for businesses to consolidate and capitalise on opportunities and it is these synergies that will enable businesses to debottleneck capacity and limitations and provide a boost to future revenues and profitability. Merger mania is contagious globally. The V-shaped recovery in global M&A volumes – which began in third quarter of 2020 – has continued to gain momentum as the year has progressed,” concluded Jasani.