Merger and acquisition (M&A) deals in the Middle East will see gradual improvement in 2012, particularly among key players not impacted by liquidity constraints, such as Saudi Arabia, Abu Dhabi and Qatar, said a report.

The majority of M&A transactions over the past two years have concentrated on the GCC region, in particular the UAE and more recently Saudi Arabia, indicated the M&A report from Deloitte, a professional services firm.

However, there are increasing signs that the more active funds in the region have begun to redirect their focus to target the wider Mena region including North Africa (Morocco, Tunisia), Levant (Lebanon, Jordan, Iraq), and Turkey, according to the report.

M&A advisory experts at Deloitte predict that several sectors such as education and healthcare, consumer goods and the food and beverage industry will continue to be of interest, in addition to the financial services sector, which is also apt for consolidation.

“Given the relatively limited number of active investors in the region, and with sectors like healthcare, education, consumer business, and oil and gas being amongst the most attractive for private equity, the region is characterized by many investors pursuing the same deals,” said Richard Clarke, managing director, Transaction Services at Deloitte Middle East.

“The more key players seek to diversify their sector expertise, the more they will be able to identify and capitalize on additional opportunities,” he added.

Clarke predicts that other sectors, such as oil and gas will also likely see M&A activity, particularly in Qatar and Abu Dhabi, as both nations have an integrated master plan for their energy sector, and any acquisitions will need to fit this paradigm.

“Investors throughout the Middle East, for whom liquidity is not a constraint, are on the lookout both regionally and globally for quality assets with good underlying fundamentals. We are witnessing an increasing number of buy side opportunities, particularly as assets that are either non-core to their existing owners, or are scheduled for divestment as part of a restructuring process, come to market,” said Robin Butteriss, managing director, Corporate Finance Advisory at Deloitte Middle East.

“This situation is particularly true in Europe where macroeconomic liquidity issues are resulting in non-core asset sales and creating opportunities for ambitious Middle Eastern players to expand into the global arena,” he added.

Moreover, with a reported $25 billion in corporate bonds and sukuks maturing this year, Deloitte’s M&A experts indicate that there are still opportunities in certain segments of the market, with a probable new round of asset sales as part of additional refinancing plans.

They predict further that the level of international interest in regional assets will likely remain passive, due to ongoing political uncertainty across the Mena region. – TradeArabia News Service