While merger and acquisition (M&A) deal volumes in the Middle East have decreased over the past two years, there are some positive signs of activity picking up and this is expected to gain momentum towards the end of 2018 and early 2019, said a new report.

Transformational reform is playing its part in stimulating the deal market across the region, added the report titled “TransAct ME - Deals trends and outlook for the Middle East” from professional services firm PwC Middle East.

Achieving organic growth and bridging the valuation gap in certain sectors are just some of the challenges that investors and owners continue to face, it said.

Governments across the region are creating an enabling environment in an effort to increase investment activity by introducing various transformational reforms including, for example, recent announced changes in M&A regulations and foreign ownership rules.

In Saudi Arabia, the government is updating and introducing new laws to diversify its economy as it seeks to create an investor-friendly climate for privatization. In addition, the UAE’s digitization agenda for 2021 will create M&A opportunities across a range of sectors including financial services, transportation and logistics and retail.

Ovais Chhotani, transaction services director at PwC Middle East commented on the report: “ We are currently seeing an interesting shift taking place in the regional M&A landscape with newer sectors emerging focused on technology and digitisation, corporates pursuing M&A more aggressively to drive growth and the ongoing privatisation agenda of regional governments opening up interesting new opportunities for both regional and international investors.  At the same time, we continue to see investor interest in traditional sectors such as Education and Healthcare where regionally, growth opportunities still exist.”

From PwC’s recent Middle East 2018 CEO survey, more than half of those surveyed are considering a strategic alliance or joint venture in order to drive corporate growth and profitability as organic growth proves more challenging.

Organisations looking at M&A to drive future growth will need to have a clear understanding of how the potential partners fit with their long term strategic objectives and the value they are looking to achieve through any acquisition or alliance.

 Romil Radia, Deals Market leader and Regional Valuations leader at PwC Middle East, said: “Investors and companies should be looking at deals with a real ‘value creation’ lens and take a more holistic view of how value can be created across the business.  This can include factors other than cost management such as capital optimisation, use of technology and innovation.

“Organisations looking to divest need to start early and carefully plan to ensure that the business is well prepared for the demands of an exit process, the growth story can be properly articulated and any potential deal breakers are identified and addressed early on in the process.” – TradeArabia News Service