JEDDAH: The total value of merger and acquisition (M&A) deals announced in the MENA region surged 65 percent to hit $55.9 billion in 2010 compared to $33.9 billion the previous year, according to Ernst & Young. The total volume of announced M&A deals also increased from 353 deals in 2009 to 402 deals, a rise of 14 per cent, said Ernst & Young in its MENA M&A update. Meanwhile, the total announced deal volume in fourth quarter of 2010 more than doubled from 2009 levels, increasing from 70 deals to 152 deals, up 117 percent. Total announced deal value in Q4 increased by three times compared to Q4 2009 levels, rising from $5 billion to $15.6 billion in Q4 2010, a rise of 212 percent. Phil Gandier, head of Transaction Advisory Services at E&Y MENA, said: "The fourth quarter accounted for the greatest deal volume in 2010, recording deals that were comparable to 2008 levels. Q4 witnessed five of the top 10 deals and the highest volume of deals in 2010." "It also witnessed the year's second highest value of deals at $15.6 billion, following the third quarter value of $21.7billion," he added. The top deal in terms of value is General Organization of Social Insurance's stake in Saudi Basic Industries Corporation, valued at $3.6 billion, followed by Qatar Holding's stake in Banco Santander, valued at $2.7 billion. Announced domestic transactions comprised more than half of all deal volume in 2010, at 54 percent, followed by outbound deals at 29 per cent and inbound deals at 17 percent. The domestic sector reigned in terms of deal value as well comprising 47 percent of total announced deal value in 2010, Ernst & Young said. Outbound transactions closely followed with 45 percent. The inbound sector saw the lowest deal value activity at 8 percent. Of the total number of announced transactions in the MENA region in 2010, Egypt led with 47 deals, followed by Jordan with 31 deals, and Saudi Arabia with 30. Following Egypt was Saudi Arabia at 18 percent with deal value worth $4.7 billion; and finally, the UAE at 9 percent, with deal value worth $2.5 billion. The UAE was the top acquiring country in terms of volume of deals with 42 deals, which comprised 36 percent of total volume of outbound deals; following the UAE was by Qatar with 14 deals comprising 12 percent and Saudi Arabia with 13 deals comprising 11 percent, Ernst & Young report said. The UAE was also the top acquirer by value of deals, having acquired approximately $10.8 billion worth of deals, it added. In terms of deal value from MENA region, the United Kingdom ranked highest with deals worth $5.2 billion; Brazil closely followed with deals worth approximately $4.5 billion. Of the total number of announced outbound transactions in MENA in 2010, the United States ranked highest with 14 deals, followed by the UK, India and Turkey, with 12 deals each. On the 2011 outlook, Gandier said, "Predictably, upcoming deal activity will be affected by the developments in the region. We hope to see M&A activity pick up again once the situation stabilizes." "We expect financial services, manufacturing and industrials, consumer products, telecom and property to lead deal values in 2011," he added. However, for this year, regional deals stand to be delayed due to ongoing unrest. "There is a certain lack of willingness here in the region to face difficult decisions and restructurings come along with making those difficult decisions," StanChartered's Pilarczyk said. UAE telecom firm Etisalat scrapped its $12 billion offer to buy a controlling stake in Kuwaiti rival Zain, citing Zain's divided board, extended due diligence and regional unrest. "The Zain/Etisalat deal clearly shows how difficult it is to do an M&A deal in this part of the world," said Pilarczyk. Regionally, the UAE still accounts for a significant part of the overall M&A space but Qatar and Saudi Arabia are also gaining prominence, according to the executives. "Within MENA, the fee value for M&A in broad terms is 40 percent UAE still. Getting deals done in Saudi is quite difficult but it's the elephant in the room. Qatar clearly is on an outbound buying spree," Shah said. M&A fees accounted for 47 percent of the overall activity in 2010, down from 55 percent in the previous year, according to Thomson Reuters league tables.
