GCC M&A Market Rebounds with a 39% Volume Growth in the First Half of 2021 Compared to the First Half of 2020
A new BCG report highlights a positive growth in the GCC’s volume of deals in the first half of this year in comparison to the first half of 2020. The region’s performance is attributed to higher transactions, despite the regional value of deals decreasing in the same period.
Dubai, December 12, 2021— Following an unprecedented economic shock caused by the sudden global health crisis, mergers and acquisitions (M&A) activity stopped in its tracks in 2020. However, the segment has since rebounded strongly, with deals soaring in volume and value in 2021, according to a new report by Boston Consulting Group (BCG) in collaboration with Germany’s Professor Sönke Sievers of Paderborn University. The report, titled Master the Art of Breaking Up, sheds light on both positive and negative scenarios that have transpired across global markets in recent times, including in the GCC.
“Despite the ongoing crisis, the impact on M&A deals being made has proven to be temporary, with volume rallying substantially this year following an intense period of difficulty not long ago,” explained Ronald Maalouf, Managing Director and Partner, BCG. “The outcome for the region is attributed to a higher volume of transaction, as well as corporate decision-makers, investors, and deal brokers operating across the region. Their adaptability has collectively enabled the M&A segment to rebound favorably generally, although deal value must now follow the volume of deals in rebounding before the re-emergence processes are concluded, which rests with a collective effort from respective local markets.”
For example, the Kingdom of Saudi Arabia (KSA), had recorded a decrease in deal value in the first eight months of 2021, albeit an increase in the volume of deals by 13%. The decrease of deal value is an indication of less large-scale transactions that the Kingdom has seen in previous years – such as Saudi Aramco’s acquisition of SABIC in 2019 and the National Commercial Bank’s merger with Samba Financial Group in 2020. However, the growth in the volume of deals for the Kingdom in 2021 further indicates a more diverse and less concentrated number of deals – highlighting stronger deal activity in the Kingdom.
Meanwhile, deal value in the United Arab Emirates (UAE) has increased sharply alongside the volume of deals in the first eight months of 2021, recording a total of 100 deals amounting to USD 11 billion. This is mainly due to a rebound in large deals, with four such transactions valuing over USD 1 billion in total, contributing to a 433% increase compared to the first eight months of 2020.
“These examples illustrate that deal value in the GCC will follow a volume of rebounding from the pandemic,” said Ihab Khalil, Managing Director and Partner, BCG. “This will stem from several factors that continue unfolding across the region, such as increasingly favorable economic conditions, industrial and regional consolidations, and widespread sustainability efforts. That being said, the coming period is one where value creation can also be attained in other areas, including on the back of divestitures.”
BCG’s report highlights that regional sellers have gained more longer-term value from divestments than their peers at the global level, with cumulative abnormal returns (CARs) reaching a median of 1.8%, which is particularly notable when benchmarked against the global 0.3%. Furthermore, relative total shareholder returns (RTSR) for the region, which measure outperformance or underperformance of a seller’s value creation compared with its benchmark index during the two years after a divestiture, have also risen. The GCC figure now stands at 6.6% compared to the global 1.6%, conveying that – in spite of divestments volume trending downwards in recent years – sizeable shareholder value can result from frequent portfolio restructuring and divestitures of non-core assets.
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