The Mena M&A market markedly regressed during the second quarter (Q2) of 2015, well behind its prolonged three-year revived activity, with the total value reaching only $3 billion, a report said.

With the total number of completed deals on a general declining trend since 2009, the announced value of M&As reached during Q2 is below its median level of the last six years, elaborated the report released by Mena Research Partners (MRP), a research outsourcing company and Bureau van Dijk (BvD), a global provider of business and M&A intelligence.

The overall 12-month activity now falls short from a sustained and marked rebound mainly due to the regional political turmoil which is cited amongst the major factors weighing on investor confidence in the Mena region. Thinking long-term, the region depicts a long-term compelling economic growth story, sufficient to propel more transactions going forward.

This has depressed the average deal sizes although the trend of larger transactions still holds, the report said.

From a geographic perspective, deal activity has been largely driven by a strong performance in GCC while the remaining of the region attracted a smaller share of the flow with selected Arab Spring countries like Egypt and Morocco witnessing a sustained uptrend.

In fact, the GCC region continues to account for the bulk of the regional deal flow, with 79 per cent and 56 per cent respectively of the announced value and the volume of completed deals during Q2.

This is in line with the general trend witnessed during the years 2013 and 2014, in an indication of larger deals being closed outside the Arabian Gulf countries. All in all, larger ticket sizes are more common in the GCC, as opposed to a larger number of smaller deals in other Mena countries, according to the report.

Lisa Wright, Zephyr director said: “After a positive showing in the first quarter of this year, Q2 2015 has been disappointing in terms of aggregate deal value in the Mena region.”

“In all 120 deals worth $2,883 million have been closed in the Mena region in the second quarter of 2015. The decline can be attributed to a lack of high value deals; in the period under review only one deal surpassed $1,000 million, a $1,100 million purchase of a 5 per cent stake in Abu Dhabi Company for Onshore Oil Operations by Inpex. This once again illustrates the difference a high-value transaction can make.”

Cyclical sectors continued to be a major focus for the acquirers. During the first half (H1) of 2015, sectors like banks, construction and service companies continued to account for a substantial share of the regional completed M&As, prolonging the previous years’ trend.

In terms of deal attitude, minority acquisitions accounted for most of the number of the regional deals during H1, sustaining their lead over the past years relative to majority deals. This is in line with the general perception that regional investors are less reluctant to give up control of their business, the report said.

Foreign acquirers have remained one major component in the Mena M&A market, although depicting a regression since 2010.

During H1, they have accounted for 49 per cent of the number of completed deals, slightly lower than the numbers witnessed during the past five years.

On one hand, this reflects a confidence of global players in a large number of regional economies and, on the other, a step backwards in the overall investor confidence in selected countries. All in all, it still offers some interesting exit options for local investors. – TradeArabia News Service