The total value of mergers and acquisitions (M&As) in the Middle East and North Africa (MENA) region dropped by 40 percent to $8.5 billion in Q1 2012 from $14.1 billion in Q1 2011, Ernst & Young said Wednesday in its MENA Mergers & Acquisitions update. The total M&A deal value ($8.5 billion) in the first quarter of this year jumped by 181 percent compared to the previous quarter (Q4 2011) which saw announced deals worth $7.2 billion. The volume of announced M&A deals increased by seven percent, from 98 deals in Q1 2011 to 105 deals in Q1 2012. Average announced deal size was down 34.7 per cent, from $372.1 million in Q1 2011 to $242.9 million in Q1 2012. Phil Gandier, MENA Head of Transaction Advisory Services at Ernst & Young, said "we are still seeing a level of caution in the regional markets. Overall, the positive news from the 2012 Q1 M&A numbers is that the start of this year has been better in comparison to the start of 2011." "A total of 19 sovereign wealth and private equity deals took place in Q1 2012, with 10 deals in the month of March alone. This could mean that private equity players, who are usually the first movers in M&A, are taking comfort from upward revisions of regional economic growth projections and are gaining in transaction confidence," he added. UAE, Qatar and Saudi Arabia account for 78 percent of total announced domestic deal value in MENA. UAE topped the region in terms of total value, comprising approximately 29 percent of total domestic disclosed deal value at $445 million; followed by Qatar also at 29 percent of total domestic deal value at $439.6 million; and Saudi Arabia at third position with 20 percent of deal values worth $304 million. In terms of deal volume in Q1 2012, the main countries targeted for domestic deal activity in MENA include the UAE with 13 deals, followed by Saudi Arabia and Egypt with seven deals each. The top 10 deals in Q1 2012 are valued at $7.27 billion or 85.5 per cent of the total regional M&A deal value. Of these, five are outbound (regional business buying international assets), three are domestic (regional business buying regional assets) and two are inbound (international business buying regional assets). In terms of total domestic deal value in Q1 2012, consumer products assets have replaced real estate as the most sought after sector in MENA, valued at $572 million. Real estate saw deals worth $562.1 million, followed by transportation and insurance deals worth $140 million and $125 million, respectively. In terms of total volume of domestic deals, consumer products led with seven, followed by real estate, banking and capital markets, and diversified industrial products, all with six deals. The top two deals by value in Q1 2012 are both worth $2 billion and involve UAE SWF/PE firms buying global assets. These deals are Mubadala Development's acquisition of Brazil's Grupo EBX and Centurion Investment Company's acquisition of India's UAE Exchange & Financial Services. The third spot went to France Telecom SA who bought a $973 million stake in Egyptian Company for Mobile Services. The fourth and fifth spots were occupied by Qatari investors buying UK and UAE assets. These include the $525 million announced deal of Qatar Investment Authority buying One Cabot Square in the UK, and Mannai Corporation's $445 million investment in Damas International respectively. With a disclosed deal value of $5.5 billion in Q1 2012, outbound deals make up 64.7 percent of M&A transactions in Q1 2012. Domestic and inbound deals were both 17.64 percent of total value at $1.5 billion each. In the cross-border segment, average size of inbound deals increased by 68.9 percent, rising from $113.1 million in Q1 2011 to $191 million in Q1 2012. Average announced deal size in the outbound category dropped 34.2 percent in value between the two periods, from $691 million in Q1 2011 to $454.8 million in Q1 2012. Average domestic deal size dropped by 65.4 percent from $292.2 million in Q1 2011 to $101.1 million in Q1 2012. "Regional investors continue to dominate the M&A market and continue on their path of large international investments for solid assets. This trend will continue going forward," Gandier further said.
