According to EY’s 2013 year-end MENA mergers and acquisitions (M&A) update, announced deal values in the region rose from $44.8 billion in 2012 to $50.7 billion in 2013, an increase of 13 percent. In 2013, 442 deals were announced as compared to 398 deals in 2012, an increase of 11 percent.

The fourth quarter of 2013 saw higher deal activity yet lower deal value compared to the same period in 2012. Announced deal volumes increased by 11 percent from 107 deals in Q4, 2012 to 119 deals in Q4, 2013. Deal values declined by 40 percent from $13.3 billion in Q4, 2012 to $8 billion Q4, 2013. In comparison to the previous quarter, announced deal values decreased from $17.5 billion in Q3, 2013 to $8 billion in Q4, 2013, whereas announced deal activity increased by 28 percent from 93 deals in Q3, 2013 to 119 deals in Q4, 2013.

Phil Gandier, MENA head of transaction advisory services, EY, said: “Overall, 2013 was a better year for the M&A market. However, Q4, 2013 fell short in terms of deal value compared to Q4, 2012. We expect performance to continue to improve into 2014 due to the alignment of core fundamentals such as positive economic sentiment, enhanced credit availability, the imperative for growth and the expectation to create jobs.”

According to EY’s latest MENA Capital Confidence Barometer (CCB), which measures corporate confidence and boardroom trends at a MENA level, 75 percent of respondents expect local deal volumes to improve and 51 percent consider growth their primary focus. The highest percentage of confidence in the local economy is shown for indicators such as economic growth (70 percent) and credit availability (59 percent). In addition to growing confidence, 87 percent of executives now consider credit either stable or improving — the highest levels in the last two years.

The sectors most likely to make an acquisition in the next 12 months are consumer products, real estate, automotive, diversified industrial products and financial services. 75 percent of MENA CCB respondents stated that they would use cash to fund their future acquisitions, indicating high levels of liquidity with corporates and family businesses.

Of the top 10 announced deals by value in MENA in 2013, five of the deals were acquired by UAE companies and two of the deals were acquired by Qatari companies.

The largest M&A deal in 2013 was the merger of Dubai Aluminum with Emirates Aluminium for $7.5 billion, followed by the acquisition of Itissalat Al Maghrib SA (Maroc Telecom) in Morocco by Emirates Telecommunications Corporation in the UAE for $6.1 billion. The trend of telecommunication deals representing mega deal values continued in 2013 with Qatar Foundation buying a 5 percent stake in Bharti Airtel for $1.3 billion.

In terms of value, domestic deal values rose to $22.5 billion, followed closely by outbound deals with announced deal values of about $18.5 billion, 37 percent of total announced deal value in 2013. In terms of volume, domestic transactions outnumbered inbound and outbound deal activity, comprising 49 percent of total deals in 2013.

Total inbound announced deal value was $9.7 billion, slightly short of $9.9 billion of announced inbound deal value in 2012. The target sector focus of inbound deals in 2013 was oil and gas, representing 39 percent of total inbound deal value. In terms of volume, the oil and gas sector led as the target sector of inbound deals, with 18 deals, representing 18 percent of total inbound deals.

Anil Menon, MENA head of M&A advisory services, EY, said: “MENA has historically been a net exporter of capital. 2013 was different in the sense that much of the acquisition capital was allocated within MENA.”

Of the 442 deals announced in the MENA region in 2013, sovereign wealth funds (SWF) were involved in 19 deals with announced deal value of $14.5 billion — making SWFs the single largest buyer constituency in MENA contributing 29 percent of total deal value in 2013. In addition to the Investment Corporation of Dubai and Mubadala’s decision to merge the businesses of Dubai Aluminum and Emirates Aluminum, Mubadala was also involved in a consortium with other investors for the acquisition of IMG Worldwide, valued at $2.3 billion.

Of the 442 deals announced in the MENA region in 2013, PE’s were involved in 66 deals with the announced deal value of $4 billion. Among the PE buyers, a notable transaction was Jabez Partners’ acquisition of Green Non-Life Insurance Company in South Korea for $1.5 billion.

“According to the findings in our recent Capital Confidence Barometer, confidence in the regional economy is at its highest in two years, cash is in abundance, and credit is readily available. As confidence returns to board rooms, we should see strengthened buyer intentions driving increased deal activity in 2014,” Gandier added.