Mergers, acquisitions reshaping GCC’s overall business landscape

Mergers, acquisitions reshaping GCC’s overall business landscape
Setting appropriate key performance indicators to achieve synergies and targets, integrating teams, and developing a clear longer-term plan are all critical in setting up a deal for success in the region. (SPA)
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Updated 13 January 2024

Mergers, acquisitions reshaping GCC’s overall business landscape

Mergers, acquisitions reshaping GCC’s overall business landscape
  • Rise in activity comes as region shifts focus on implementation of comprehensive renewable energy programs

RIYADH: Of late, businesses in the Gulf Cooperation Council region have become more inclined toward pooling their resources to achieve operational efficiency and maximize profits.

The trend of mergers and acquisitions in the GCC is expected to rise, said Moody’s in March 2023. Nearly one year on, the global rating agency’s prediction seems to be spot-on.

M&As are business transactions in which the ownership of firms, business organizations, or their operating units are transferred to or consolidated with another firm or business organization.

Several factors can make such transactions successful in today’s world such as synergies, trust, and integration, according to Andrew Nichol, partner at Lumina Capital Advisers.

“Synergies are unlikely to deliver the desired outcomes of selling and buying shareholders without a clear plan on how a merged entity creates more significant value than their individual parts,” Nichol told Arab News.

He added: “Trust because ultimately, deals are done between people. Be they the shareholders, management teams, or employees, it is critical that communication throughout the process remains open, transparent, and oriented toward achieving the objectives set out in the original deal thesis.”

Finally, about the integration aspect, Nichol noted: “Integration, because M&A does not stop once the legal agreements are signed.”

Additionally, setting appropriate key performance indicators to achieve synergies and targets, integrating teams, and developing a clear longer-term plan are all critical in setting up a deal for success, he reiterated.

The year 2023 saw a real shift in terms of “who” has been transacting into and out of the region, Nichol said. 

“In H1, we saw larger deals, typically led by SWFs (sovereign wealth funds) — SAVVY Gaming/PIF/Scopely, KSA; Blackstone/ADIA/Cvent Holding, UAE,” Nichol underlined.

“As the year progressed, we also saw an increase in private sector-led deals, as well as a resurgence in private equity activity,” he added.

Nichol continued: “In November, STS, a leading digital transformation solutions provider across Saudi Arabia, the UAE, and the wider GCC announced its acquisition by ZainTECH.”

ZainTECH is a UAE-based top-tier managed security services provider that aims to help enterprises protect against, detect expediently, and respond effectively to cybersecurity threats.

According to Nichol, this specific M&A stood out in 2023 amid all other similar transactions in the region.

“The STS/ZainTECH transaction, which we advised on, stood out due to its highly strategic nature for both companies,” he disclosed.

“A buyer, seeking to extend and amplify its services offering, access top talent, and expand the geographies it serves, with a vendor recognizing the opportunity of partnering with a pioneering regional digital solutions provider,” Nichol explained.

Moving on, he also shed light on projections on the nature of M&As to expect in the region in 2024.

“In 2023, the region cemented its position as a net exporter of innovation due to the regional giga-projects, digital transformation efforts, and the implementation of artificial intelligence. This will continue into 2024,” Nichol said. This comes as the region has shifted from talking about energy transition to becoming a global leader in implementing some of the world’s most comprehensive and diverse renewable energy programs, according to him.

“In 2024, we will see more deals in the region as global firms continue to grow/seek access to regional projects,” Nichol projected.

He added: “We expect growth across energy transition, healthcare, travel and tourism as well as gaming, engineering and project management and digital transformation sectors.”

Highlighting the same subject, Ali Anwar, managing director of Alvarez & Marsal Global Transaction Advisory Group in the Middle East, said in a recent report: “Investors have experienced a challenging year in 2023 when M&A activity was hit by concerns about the macroeconomic environment and the impact of higher interest rates.”

He added: “While those challenges haven’t fully abated, 2024 holds the potential for dealmaking to show some improvement.” 

In 2024, we will see more deals in the region as global firms continue to grow/seek access to regional projects.

Andrew Nichol, Partner at Lumina Capital Advisers

One major positive for the M&A market heading into 2024 is receding uncertainty about the trajectory of interest rates, the top executive underlined.

Anwar went on to shed light on the fact that market participants are seen being more confident than they have been in several months and that there seems to be a promising inversion of the curve since the end of summer.

He stated: “We are seeing more sell-side activity and, therefore, expect deal opportunities to launch in early 2024.”

Rise in cross-border activities

In 2023, cross-border deals formed the majority of closed deals, Nichol revealed.

Cross-border activities refer to any transfer of property, goods, or services between individuals or business entities who reside in different jurisdictions.

“In our September 2023 cross-border deals survey, 70 percent of respondents had recently or planned to close a cross-border deal within the next 18 months. This was double the levels of our previous survey,” Nichol highlighted.

He added: “Deals in the region are today driven by the desire to create regional champions through consolidation in key sectors such as construction, health care, and infrastructure services, in conjunction with transactions centered around international interest in joint ventures and partnering to deliver skills and technologies for complex megaprojects in AI, digital transformation and advanced manufacturing.”

Talking about expectations in 2024, Nichol clarified that it is projected to be another bumper year for cross-border Middle East transactions.

This comes as private equity — both direct and secondary — has become the fastest-growing asset class in the region, and this trend will continue into 2024, Nichol said.

“With regional funds being raised from domestic, international, and SWF participants, we predict the volume of PE deals will rise,” he explained.

Likely spike in FDIs

The year 2022 was a record year for foreign direct investments in the GCC region, particularly Saudi Arabia and the UAE, exceeding previous 2012 highs, Nichol said.

“While we are still awaiting full-year 2023 FDI numbers, we predict that Saudi Arabia’s FDI will have exceeded the UAE’s, and both countries will see double-digit year-on-year FDI growth,” Nichol underscored.

 FDI is a category of cross-border investment in which an investor resident in one economy establishes a lasting interest in and a significant degree of influence over an enterprise resident in another economy.

As for 2024’s pipeline in terms of FDIs, it is projected to be somewhat robust.

“FDI flow growth rate has been diminishing in 2023; however, long-awaited public-private partnership projects are in the pipeline, especially in healthcare, transportation, logistics, and sports,” Razeen Capital CEO Mohammed Al-Suwayed told Arab News.

Razeen Capital is a financial securities consultancy firm that Al-Suwayed founded in January 2021.

“So we’re most likely to see a spike in the FDI growth rate this year and the years after,” Al-Suwayed projected.

That being said, it is clear that the GCC region is on track to experience a bright future ahead in terms of M&As as well as cross-border activities and FDIs.

Consequently, this will most likely help offset the rising operating expenses and boost cost-efficiency further in the region.

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 
Updated 7 sec ago

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 

Saudi-China financial markets enter new era with ETFs listed on Chinese bourses: PIF 

RIYADH: Saudi Arabia and China’s financial markets will see a new chapter of connectivity with the recent launch of exchange-traded funds on Chinese bourses, according to Public Investment Fund Governor Yasir Al-Rumayyan. 

In a release, Al-Rumayyan stressed that the ETF gives investors in Asia access to the Saudi equity market and its sustainable long-term growth driven by strategic economic transformation. 

Last week, two new ETFs focused on the Kingdom’s stocks debuted in Shanghai and Shenzhen. The feeder funds, operating under the Qualified Domestic Institutional Investor program, began trading on July 16, with both briefly hitting the 10 percent daily limit on their launch day. 

The first fund, CSOP Saudi Arabia ETF QDII, managed by China Southern Asset Management, is listed on the Shenzhen Stock Exchange after raising 634 million Chinese yuan ($87 million).  

The second fund, the Huatai-PineBridge managed CSOP Saudi Arabia ETF QDII, started trading on the Shanghai Stock Exchange after raising 590 million Chinese yuan. 

These new ETFs are among the first batch of funds in China able to invest in the Saudi Arabia stock market. 

PIF aims to attract foreign investors and deepen capital inflows into Saudi Arabia, continuing from the success of the CSOP Saudi Arabia ETF introduced on the Hong Kong Stock Exchange in November 2023. This fund, launched with an initial investment of over $1 billion, including a $500 million contribution from PIF, became the world's largest Saudi Arabian ETF. 

Saudi Arabia launches competition for 5 licenses to boost mineral exploration

Saudi Arabia launches competition for 5 licenses to boost mineral exploration
Updated 32 min 42 sec ago

Saudi Arabia launches competition for 5 licenses to boost mineral exploration

Saudi Arabia launches competition for 5 licenses to boost mineral exploration

RIYADH: Saudi Arabia has unveiled its largest mineralized belts to date, spanning 4,788 sq. km and including five new exploration licenses. 

Three of the permits, which were offered to local and global firms, are reserved for the Jabal Sayid site in Madinah.  

It covers an area of 2,892 sq. km and entails minerals like gold, silver, copper, zinc, and lead, according to a statement issued by the Ministry of Industry and Mineral Resources.  

The remaining two licenses pertain to the Al-Hajjar Site in the Asir region, which encompasses 1,896 sq. km and also includes gold, silver, copper, zinc, and lead. 

This initiative aims to accelerate the exploration and development of Saudi Arabia's mineral resources, valued at SR9.3 trillion ($2.4 trillion).  

This is in line with Saudi Arabia’s ambition to transform mining into a foundational industrial pillar of the country’s economy. It also aligns with the ministry’s goal to further bolster the sector and contribute to ongoing developments under Saudi Vision 2030.    

Global electricity demand to grow by 4% in 2024: IEA 

Global electricity demand to grow by 4% in 2024: IEA 
Updated 21 July 2024

Global electricity demand to grow by 4% in 2024: IEA 

Global electricity demand to grow by 4% in 2024: IEA 

RIYADH: Global electricity demand is expected to rise by around 4 percent this year, up from 2.5 percent in 2023, driven by robust economic growth, according to an analysis.  

In its latest report, the International Energy Agency highlighted that intense heatwaves and the growing adoption of electricity-powered technologies, such as electric vehicles and heat pumps, are driving the increase in global electricity demand. 

Many regions experienced severe heatwaves in the first half of 2024, which heightened electricity needs and strained power grids. May was the hottest month of the year, marking the 12th consecutive month of record-high temperatures. 

India, Mexico, Pakistan, the US, Vietnam, and several other countries experienced severe heatwaves in the first half of the year, leading to surging peak loads due to increased cooling needs. 

“Growth in global electricity demand this year and next is set to be among the fastest in the past two decades, highlighting the growing role of electricity in our economies as well as the impacts of severe heatwaves,” said Keisuke Sadamori, director of Energy Markets and Security at IEA.  

The energy agency added that more households, especially in emerging economies, have started to purchase air conditioners, further driving electricity demand in these regions. 

The IEA also emphasized that adopting higher efficiency standards for air conditioning is crucial to mitigate the impact of increased cooling demand on power systems. 

The report also highlighted that expanding and reinforcing power grids is essential for ensuring a reliable electricity supply. 

The IEA noted that renewables are rapidly advancing globally, with solar photovoltaic set to achieve new records. 

India and China to drive growth 

The energy think tank further noted that this rise in electricity demand growth will be driven by countries like India, China, and the US.  

“We expect this demand trend to continue in 2025, with growth also at 4 percent. In both 2024 and 2025, the rise in the world’s electricity use is projected to be significantly higher than global GDP (gross domestic product) growth of 3.2 percent. In 2022 and 2023, electricity demand grew more slowly than GDP,” the IEA added.  

According to the analysis, electricity demand in China is forecast to increase by 6.5 percent in 2024, similar to its average rate between 2016 and 2019.  

India will witness an 8 percent rise in electricity consumption in 2024, matching its rapid growth in 2023.  

“In the first half of 2024, the country (India) grappled with heatwaves of record duration, with peak load reaching a new high and putting exceptional strains on power systems. Assuming a return to average weather conditions, we expect electricity demand growth in India to ease moderately to 6.8 percent in 2025,” the IEA added.  

The report further highlighted that electricity demand in the US is set to rebound significantly in 2024, increasing by 3 percent year-on-year, driven by a positive economic outlook and the rising need for air conditioning amid severe heatwaves.  

In the EU, demand is expected to increase by 1.7 percent as economic difficulties ease, but uncertainty over the pace of growth remains.  

“EU electricity consumption had contracted over the two previous years, with the decline in output from energy-intensive industries an important driver. Signs of a recovery in EU electricity demand emerged starting in the fourth quarter of 2023,” said the IEA.  

It added: “Growth gained further traction during the first half of 2024 as energy prices stabilized and various industries that had previously curtailed operations restarted.”  

Clean energy sources  

According to the analysis, despite a sharp rise in power consumption, solar PV alone is expected to meet roughly half of the growth in global electricity demand by 2025.  

IEA further noted that global electricity generation from solar PV and wind is expected to surpass that from hydropower in 2024.  

“The global energy transition is set to achieve another significant milestone by 2025, with total renewable generation poised to overtake coal-fired electricity output. The share of renewables in global electricity supply rose to 30 percent in 2023 and is projected to climb further to 35 percent in 2025,” said the IEA.  

Despite the sharp increases in renewables, global power generation from coal is unlikely to decline this year due to the strong growth in demand, especially in China and India.  

The study highlighted that carbon dioxide emissions from the global power sector are plateauing, with a slight increase in 2024 followed by a decline in 2025.  

“It’s encouraging to see clean energy’s share of the electricity mix continuing to rise, but this needs to happen at a much faster rate to meet international energy and climate goals,” said Sadamori.  

He added: “At the same time, it’s crucial to expand and reinforce grids to provide citizens with secure and reliable electricity supply – and to implement higher energy efficiency standards to reduce the impacts of increased cooling demand on power systems.”  

Meanwhile, Fatih Birol, IEA’s executive director, said that the energy industry should urgently reduce its carbon emissions if the world wants to avoid catastrophic climate change in the coming decades, according to a press statement.  

“About 80 percent of emissions that cause climate change come from fossil fuels. This is the reason there is a need to reduce emissions if we want a planet in the future that is like it is today,” Birol told the Al-Attiyah Foundation in a podcast interview.  

He added: ‘This doesn’t mean that tomorrow we will not need fossil fuels, but the share of fossil fuels needs to decline. If we don’t, we will face catastrophic implications like floods, heat waves, and other extreme weather events. Continuing with the current fossil fuel-based energy system is not good news for anybody— producers and consumers alike.”  

In the latest report, the IEA also projected that global nuclear generation is on track to reach a new high in 2025, surpassing its previous record in 2021.  

According to the energy agency, nuclear generation is forecast to rise globally by 1.6 percent in 2024 and by 3.5 percent in 2025, driven by a steady increase in output by the French nuclear power fleet as maintenance works are completed.  

The restarting of reactors in Japan and the arrival of new reactors in various markets, including China, India, Korea, and Europe, support the growth in nuclear power generation globally.  

The report also noted that the rise of artificial intelligence has put the electricity consumption of data centers in focus, making better stocktaking more important than ever. 

“In many regions, historical estimates of data centers’ electricity consumption are hampered by a lack of reliable data. At the same time, future projections include a very wide range of uncertainties related to the pace of deployment, the diverse and expanding applications of AI, and the potential for energy efficiency improvements,” said the IEA.  

It added: “Expanding and improving the collection of electricity demand data from the sector will be crucial to identify past developments correctly and to understand future trends better.”

AlUla participates in global forums to strengthen Saudi-China cultural ties

AlUla participates in global forums to strengthen Saudi-China cultural ties
Updated 21 July 2024

AlUla participates in global forums to strengthen Saudi-China cultural ties

AlUla participates in global forums to strengthen Saudi-China cultural ties

RIYADH: Saudi Arabia and China have deepened their cultural ties as the Royal Commission for AlUla participated in key global forums in Istanbul and Luoyang.  

The RCU attended the Silk Road Dialogue and the International Ancient Capitals Forum to enhance collaboration and showcase AlUla as the world’s “largest living museum.” 

The events, held from June 27 to 30, underscored AlUla’s prominent role within the International Tourism Alliance of Silk Road Cities, a network connecting 63 destinations across 28 countries along ancient trade routes.  

The forums were instrumental in expanding Saudi-China cultural partnerships and organizing official visits to AlUla. 

Saudi Arabia’s strategic focus on tourism, centered around AlUla’s rich heritage, has become a cornerstone in deepening cultural and economic ties with China, showcasing the Kingdom’s commitment to leveraging its historical assets to foster international partnerships. 

Discussions at the International Ancient Capitals Forum included high-level meetings with Luoyang officials on tourism, agriculture, conservation, and urban development, exploring new areas of cooperation between the two nations. 

“The Royal Commission for AlUla continues to build on the deep-rooted foundations of cultural partnership that exists between China, the Kingdom, and northwest Arabia,” said an RCU spokesperson in a statement. 

The spokesperson added: “The Silk Road Dialogue and International Ancient Capitals Forum events represented exciting opportunities to develop new avenues of collaboration, with a focus on expanding knowledge exchange and promoting tourism, with diverse initiatives built upon our shared status as ancient destinations and rapidly developing landmarks for human heritage.” 

The forum was launched to foster dialogue and collaboration between cities with a millennia-long history. It also facilitates an agreement signed earlier this year between AlUla and its Chinese partners at the Henan Provincial Administration of Cultural Heritage.  

The partnership seeks to enhance knowledge and shared resources, focusing on archeology, preserving cultural heritage and museums and research collaboration as well as talent development, tourism and other cultural exchanges. 

It also includes establishing a technology-driven archeological laboratory, conducting excavation activities, engaging in research and fostering connections between heritage sites in AlUla and Henan. 

The deal further involved implementing collaborative exchange programs, participating in exhibitions and events, and utilizing museum technologies such as virtual reality and augmented reality. 

Saudi government agencies boost emerging tech adoption by 10% in 2024

Saudi government agencies boost emerging tech adoption by 10% in 2024
Updated 52 min 25 sec ago

Saudi government agencies boost emerging tech adoption by 10% in 2024

Saudi government agencies boost emerging tech adoption by 10% in 2024

RIYADH: Saudi Arabia’s government agencies have made significant progress in integrating new technologies, showing a 10 percent improvement from the previous year, according to an official report.

The Emerging Technology Adoption Readiness Index, which measures the progress of government entities in implementing new solutions, increased from 60.35 percent in 2023 to 70.70 percent in 2024. This improvement is accompanied by a rise in participating agencies, which grew from 13 last year to 35 in 2024, the Saudi Press Agency reported.

The annual report published by the Digital Government Authority underscores the Kingdom’s enhanced capacity for adopting emerging technologies. This progress is a key element of Saudi Arabia’s broader transformation strategy, aimed at leveraging advanced systems to improve services for citizens, residents, and visitors.

This increase in the index highlights the Kingdom’s ongoing commitment to modernizing its digital infrastructure and aligns with its Vision 2030 objectives, emphasizing sustainable development and the advancement of its technological future.

The index helps organizations and policymakers understand their technological advancement and identify areas for growth and development — an essential component of Saudi Arabia’s objectives. 

The report highlighted progress in adopting emerging technologies, with research capability reaching 72.04 percent and communication capability reaching 71.88 percent.     

According to the report, the integration field achieved a score of 67.93 percent, while the proof capability field recorded 70.84 percent, reflecting advanced levels of development. 

Drones have improved aerial photography and real estate imaging, boosting operational efficiency by 80 percent and significantly reducing time and effort. 

Digital twinning has enabled precise asset inventory for 22 out of 36 industrial cities. Additionally, Ameen, the digital human assistant, now serves over 36,000 customers monthly. 

Augmented and virtual reality technologies have further improved digital accessibility for individuals with special needs, expanding their access to digital services. 

The Anaam Shain app has streamlined the secure management of livestock data across the Kingdom, while firefighting robots have reduced physical losses by up to 50 percent. 

In 2023, Saudi Arabia topped the Government Strategy Index for Artificial Intelligence, as ranked by Tortoise Intelligence, which evaluates over 60 countries. 

The country achieved a perfect score of 100 percent on the index criteria, including having a dedicated national AI strategy, a specialized government body for cognitive computing, allocated funding for artificial intelligence, and established and monitored national intelligence system targets.