The Finance World Magazine| Edition: March 2023

senior partner at Bain in the report’s
chapter dedicated to the Middle East.
The Global M&A Report is a valuable
resource for investors, executives, and
others interested in understanding the
current state of the M&A market. The
report provides detailed information
on sector dynamics, deal activity, and
key trends. The report is also a valuable
tool for training and recruiting. Bain &
Company is a strategic consulting firm
with a history of mergers and acquisitions.
The firm’s Global M&A Report has been
tracking in-depth sector dynamics for over
a decade, with spin-off reports created
for regions, deal buyer segments (for
example: private equity) and sectors
(for example: healthcare).
According to the firm’s 2023 analysis,
sovereign wealth funds are buying
up assets with the goal of building
local champions, investing in strategic
industries of the future, and expanding
their market share in new verticals. Some
motivations for foreign investments by
state-owned enterprises (SOEs) include
increasing their visibility on the global
stage, acquiring prestigious assets, or
increasing their profits. For example,
Qatar Investment Authority (QIA) bought
the St. Regis hotels in New York City and
Rolls-Royce, an engine maker, as examples
of investments that aim to increase the
SOE’s visibility and prestige.
Corporate deals happen all the time
in the business world. Companies buy
other companies, or form partnerships
to consolidate local markets in strategic
sectors. One recent example is the deal
between Saudi British Bank and HSBC
Saudi Arabia, and the Etihad-Air Arabia
joint venture.
Many regional companies are expanding
internationally through cross-border
M&A or through overseas investments.
For example, First Abu Dhabi Bank
merged its Egyptian operations with
Bank Audi Egypt, creating one of Egypt’s
largest banks. This approach can be very
successful as it allows companies to
tap into new markets and expand their
operations rapidly.
There is a growing trend among
corporations to invest in start-ups or
scale-ups as a way to bolster innovation
and rapidly upskill their talent pool. This
strategy has proven to be successful in
many cases, as it has fostered rapid growth
and innovation among these companies.
While the private equity scene accounts
for a major chunk of global deals activity,
in the Middle East, their role is “limited
in the region and has actually dropped
M&A activity in the regional markets increased by
nearly 39% in 2022, largely due to the activity of
government-owned sovereign wealth funds.
significantly in 2022.” This is likely due to
the region’s ongoing economic struggles.
Looking ahead, Bain & Company’s
experts believe that also in 2023, the Middle
East will demonstrate relatively higher
deal activity than other regions. “These
are good times for the local economies.
Buoyed by strong economies, and ambitious
government-backed mandates to push to
expand beyond hydrocarbons as well as
globalize its companies, the Middle East is
well positioned to rely on M&A to further
advance the region’s long-term agenda,”
said the report’s authors.
In light of recent reports suggesting
that two thirds of Middle East CEOs plan
to pursue M&A as part of their strategic
agenda and roadmap, it’s clear that this
area is of great interest to them. This
suggests that businesses in this region
are optimistic about their future and are
willing to take risks in order to grow.
Middle Eastern sovereign wealth funds
are using M&A to expand into new sectors
and build local champions, according to
Bain & Company’s fifth annual Global
Mergers & Acquisitions report. This trend
is likely to continue as Middle Eastern
funds seek to build their portfolios beyond
traditional investment vehicles, such as
equities and bonds.
By investing in innovative businesses and
consolidating their market positions, these
funds are positioning themselves to take
advantage of future growth opportunities
in their regions. This strategy is helping
these funds become nimbler and more
competitive, and is likely to continue
as these funds seek to build long-term
wealth portfolios. In particular, Middle
Eastern funds are increasingly targeting
smaller, early-stage companies, as these
tend to be more profitable and have a
higher potential for growth. The move
will strengthen partnerships, invest in
the future, and bolster the region.
M&A activity in the regional markets
increased by nearly 39% in 2022, largely
due to the activity of government-owned
sovereign wealth funds. Together, these
funds and corporate entities represented
84% of all deals during the year, with
private equity investors making relatively
few investments.
“With a strong economy buoyed by
high oil prices, the Middle East is well
positioned to rely on M&A to further
advance the region’s long-term push to
expand beyond hydrocarbons as well as
globalise its companies,” the report noted.
“These are good times for the local
economy, with expected regional GDP
growth of 6.5% (7.6% in Saudi Arabia),
the highest it’s been in more than a
decade. The Middle East’s sovereign
wealth funds are growing, too, and with
a new government mandate, they have
become a treasure chest for much of the
M&A activity.”
The report cited Saudi Arabia’s Public
Investment Fund (PIF) investing $1.3B
in four Egyptian companies in August
2022. Among these companies was Abu
Qir Fertilizers and Alexandria Container
and Cargo Handling. On one hand,
private equity activity in the region has
decreased by 36% in the first 10 months
of 2022. However, there are some signs
that interest in IPOs is picking up, which
may indicate a possible revival of the
private equity market.
Corporations are buying companies
or forming partnerships to consolidate
local markets in strategic sectors, such
as the deal between Saudi British Bank
and HSBC Saudi Arabia or the Etihad-
Air Arabia joint venture. This trend is
likely to continue as corporations seek
to improve their competitive edge and
gain an advantage in the local market.
“In the years ahead, we expect more
international companies will explore the
cross-border possibilities of partnering
with sovereign wealth funds and local
authorities to create new sectors through
joint ventures,” Bain & Company added.
Manoj Sureka
Managing Partner,
Synergy Fin. Consulting
manoj@consultsynergy.ae
March 2023 www.thefinanceworld.com 55