The findings of a survey conducted by Zawya and M: Communications revealed on Tuesday were based on the interviews of 27 leading global, regional and local financial institutions across the Gulf Cooperation Council states.
The survey, called the GCC M&A Barometer, points away from distressed sectors, such as real estate, and focuses on key industries, such as health care, financial services, energy and basic materials.
“The leadership’s resolve to meet the consumer and social needs of the growing population in the Kingdom of Saudi Arabia will trigger the M&A in the country and will keep it at the top among the GCC,” said Nicholas Lunt, Gulf managing director of M:Communications.
“There is still a long way to go before we return to the heady days of the mid-decade, but the worst is certainly over with a strong desire of those who are fit and able to take advantage of favorable valuations to get ahead in the consolidation race,” he added.
Geographically, the majority of M&A are expected to take place within the GCC area, with Saudi Arabia leading the UAE and Qatar. Eighty-five percent of bankers expect mid-market transactions to dominate the M&A market in 2010.
Jean Marc Paufique, head of Zawya’s Professional Investment Division, said the given the size of the ongoing infrastructure development in Saudi Arabia in addition to the availability of excess liquidity keep this country at the top in the M&A in 2010. “It does appear that the corner has turned with a large majority of our panel of leading bankers from both international and local firms forecasting a significant increase in M&A activity for 2010 with further acceleration in 2011,” he added.
The most bullish of the GCC’s leading investment banks are predicting a solid bounce-back for regional M&A in H2 2010 with some suggesting volumes could reach $100 billion in 2011. “Gulf M&A activity shows its first signs of life after a painful two years marked by cost cutting and balance sheet repair.”
The first GCC M&A Barometer interviewed 27 of the leading international and regional investment banks. Zawya, the leading online business and investment platform in the Middle East and M: Communications, the international financial communications agency, conducted the survey. More than 80 percent of the investment banks expect the downward trend since 2007 to reverse in 2010, with total M&A value to reach $25 billion. Looking further ahead, a significant proportion of the participants surveyed are bullish on their outlook for 2011. Some of those questioned expect GCC M&A volumes to hit the $100 billion mark for 2011.
Historically, GCC M&A has constituted up to 10 percent of global M&A activity. To date this year it has reached only 4 percent, compared to Europe’s 15 percent share, for example. However, led by the $10.7 billion deal between India’s Bharti Airtel and Kuwait’s Zain for the latter’s Africa services, the M&A sector now has an air of cautious optimism as key corporates’ first quarter earnings show a return to double digit growth.
