Market Focus | Middle East Investment Banking
What’s Driving Middle Eastern M&A?
Positive changes in the regulatory environment and further opening to foreign investors are among the factors market participants cite for expecting a significant increase in mergers and acquisitions in the Middle East this year. Following a 23% rise in the value of deals announced in 2014, the momentum is expected to continue to build, as the rules of the game are clarified.
Middle East regulatory regimes are becoming more sophisticated, which will make M&A transactions more complex and interesting, says Christopher Lester, an attorney at Latham & Watkins in Abu Dhabi. The United Arab Emirate’s new competition law recently introduced a merger-control regime that reflects many international norms. However, the competition law does not apply to government-related entities, oil and gas companies, utilities and many other important market sectors.
The UAE, Saudi Arabia and Egypt will be the focus of regional M&A transactions in 2015, says Manaf Alhajeri, CEO of Kuwaiti investment bank Markaz. “Economic reforms, liberalization of foreign investment, and an abundance of liquidity in the banking system will spur growth in M&A activity.”
Sectors that should see strong M&A activity this year include real estate, financial institutions, education, healthcare, pharmaceuticals and food and beverage companies, according to Alhajeri. “Intraregional deals from domestic family businesses and inbound deals from private equity funds based in the US and Europe are set to rise this year,” he notes.
Qatar Airways, for example, plans to continue its rapid expansion in Europe. The airline recently bought a $1.7 billion, 10% stake in International Consolidated Airlines Group (IAG), owner of British Airways and Iberia.