April 1, 2023

Dubai Week

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الصورة : إيهاب خليل

39% growth in M&A market at GCC in the first half

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The Boston Consulting Group (BCG) has released a new report at the University of Paderborn in collaboration with German professor Sonke Sievers, highlighting the positive and negative scenarios for companies and acquisitions in global markets, including the Gulf Cooperation Council. In the aftermath of the unprecedented economic crisis that the world saw in the light of the prevailing health conditions in 2020, the report entitled “Mastering the Art of Separation” confirms the recovery of the merger and acquisition process in its current state. With a significant increase in the number of contracts in terms of size and value in 2021, a large number of opportunities and capabilities after the decline of these activities in the past.

Contract amount

This 18th Annual Analysis of the M&A Terrain at GCC is based on the Boston Consulting Group’s database of over 4,500 mergers and acquisitions from January 1990 to June 2021. This report reviews the global landscape during COVID-19 epidemics. Between 2019 and 2020, contracts in the Gulf Cooperation Council countries fell by 15%, reducing the value of contracts by 61% (from $ 85 billion in 2019 to $ 33 billion in 2020). Despite the slowdown in the value-added and acquisition agreements of the Gulf Cooperation Council countries in the first half of 2021 (US $ 14 billion in the first half of 2021, or 47% less than the first half of 2020), the merger and acquisition market in the Gulf Cooperation Council countries, in the aftermath of the epidemic Is taking significant steps to recover from, with the volume of contracts increasing by 39% by 2020 compared to the first half of 2021.

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Drastic changes

Ronald Maalouf, managing director and partner of Boston Consulting Group, said: “The current economic crisis has led to drastic changes in various sectors, but its impact on mergers and acquisitions has been temporary, as the volume of contracts has increased significantly this year. Transactions.Recovery seen in the region is due to the large number of transactions, as well as the efforts of corporate decision makers, investors and contract brokers across the region.This joint adaptation in the M&A sector has led to a rapid recovery but the market needs an increase in the value of contracts in line with the current level of contracts. Markets. “

Despite the increase in the value of global mergers and acquisitions in 2021, the Gulf Cooperation Council countries saw a reversal in this area as the total value of contracts in the Middle East fell by 47%. Half of 2020 with the same phase of 2021.

In the same direction, the value of contracts in the United Arab Emirates increased significantly, increasing the volume of contracts in the first eight months of 2021, recording a total of 100 contracts worth $ 11 billion. This growth was primarily 433% due to a recovery in the size of major contracts, with four M&A transactions valued at more than $ 1 billion compared to the first eight months of 2020.

Enhance recovery

Ihab Khalil, Managing Director and Partner of the Boston Consulting Group, said: “The examples in the report confirm that the value of the agreements in the Gulf Cooperation Council countries is commensurate with the extent of the recovery seen by various economic sectors in recent times. Infectious status. There will be a number of factors that contribute to improving this recovery, such as favorable economic conditions, across sectors and organizations operating across multiple countries in the region, and a wide range of sustainability efforts. As a result, the coming period is optimal for increasing the level of transaction value in relevant areas, including equity-related activities.

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Overall income

The Boston Consulting Group reports that regional sellers have a longer-term value than their global counterparts, with gross earnings (CARs) reaching an extraordinary average of 1.8%, a significant figure compared to the global rate of 0.3%. On the other hand, the region’s total relative share income (RTSR), which measures the level of performance in developing seller value relative to its benchmark, has increased in the two years following the dissolution. The ratio is considered the highest in the Gulf Cooperation Council countries, reaching 6.6% globally compared to 1.6%, indicating that it has the potential to deliver significant value to shareholders despite declining sales volume in recent years. Basic by periodically restructuring the portfolio and dissolving assets.