The Mena merger and acquisition (M&A) market maintained the slow activity witnessed during the recent period in the third quarter (Q3) of 2015 as it fails to redress from the current lows, a report said.

The overall 12-month activity falls short from any sign of rebound, enduring the impact of the regional political turmoil and the economic spillover effects of the slump in oil prices which are amongst the major factors weighing on investor confidence in the Mena region, added the report from Bureau van Dijk and Mena Research Partners.

Despite the short to medium term challenges, when thinking long-term, the region still depicts largely attractive economic fundamentals to sufficiently propel more transactions going forward.

With the total number of completed deals generally declining since 2009 yet slightly improved during the past two quarters relative to the first quarter of 2015 low levels, the announced value of M&As reached less than $3 billion during the third quarter of 2015 which is well below the average levels of the past six years.

From a geographic perspective, while deal activity remains at large driven by a strong performance in GCC, the non-GCC countries attracted during the third quarter of2015 most of the count and value of completed deals in an indication of weaknesses witnessed within the oil exporting countries.

In fact, the GCC region accounted during the past 3 months for only 45 per cent and 44 per cent respectively of the announced value and the volume of completed deals. This is compared to a historical share of circa 63 per cent of deal values, against 36 per cent of deal volumes. On the overall, the general trend prevailing to-date is that of larger ticket sizes in the GCC, as opposed to a larger number of smaller deals in other Mena countries.

Lisa Wright, Zephyr director said: “The third quarter of 2015 represented a slight decline on the second quarter (Q2) of 2015 for the Mena region as value dropped from $2,999 million to $2,668 million, in line with the overall global trend for the quarter. Conversely, volume increased quarter-on-quarter from 129 to 163.”

“The lack of a very high value transaction appears to be the reason for the drop in value; Q3’s highest deal value was $314 million. Compared with recent quarters, the value of the region’s largest deal in Q3 was low. Previous quarters have seen transactions worth in excess of $2,000 million announced, thereby highlighting the importance of an individual deal’s consideration to a quarter’s overall performance,” she added.

Cyclical sectors continued to be a major focus for the acquirers. During 9m2015, sectors like construction and chemicals have picked relative to others, while the banking sector consolidation paused compared to previous years.

In terms of deal attitude, minority acquisitions accounted for most of the number of the regional deals during 9m2015, 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.

Foreign acquirers have remained one major component in the Mena M&A market, depicting a minor regression to 2014 levels. During 9m2015, they have accounted for 52 per cent of the number of completed deals, slightly lower than the average numbers witnessed during the past 5 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.

Mena Research Partners (MRP) is a research outsourcing company offering customized business intelligence to corporations in the Mena region.

Bureau van Dijk (BvD) is one of the world’s leading providers of business and M&A intelligence. – TradeArabia News Service