Markaz: GCC M&A transactions decreased during Q1 2020 by 51% relative to Q4 2019 due to Covid-19 outbreak


UAE’s logistics sector leads the top GCC M&A transactions during Q1 2020 as per a report recently issued by the Investment Banking Department at Kuwait Financial Centre “Markaz”. Port & Free Zone has announced its intention to acquire a 20% stake in a fellow logistics company, DP World, for a total consideration of $2.7 billion. It is worth noting that the firm currently holds 80% of DP World’s existing share capital.

The second largest transaction was taken on by Qatar Petroleum, who acquired a 25% stake in Qatar Fertiliser Company for a total consideration of $1.0 billion. The next two transactions involved UAE buyers, both of whom fully acquired local companies. The first transaction oversaw Gulf Capital acquire 100% of IVI-RMA Middle East for a total value of $100 million. IVI-RMA Middle East is the fastest growing provider of fertility treatment services in the Middle East.  The second transaction involved Mastek Arabia fully acquiring the Middle Eastern arm of Evolutionary Systems Arabia, an IT-focused consulting firm, for a total consideration of $65 million. Finally, Jazan Energy & Development Company (Jazan”) announced that it has merged its international aquaculture unit with three local aquaculture companies. Under the terms of this deal, Jazan will own a 45% stake worth $60 million in Advanced Aquaculture Company (the merged entity).

GCC M&A Growth

According to Markaz’ report, the number of closed M&A transactions in the GCC during Q1 2020 decreased by 51% relative to Q4 2019, and by 52% relative to Q1 2019.  None of the GCC countries recorded a growth in the number of closed transactions relative to the previous quarter. It is worth noting that the GCC economy experienced a significant slowdown due to the global COVD-19 outbreak and the uncertainty the pandemic has caused. As such, this has significantly impacted the level of M&A activity throughout the quarter.

Acquirers and Targets

A majority of the transactions completed during Q1 2020 and Q4 2019 were carried out by GCC acquirers. Of the total number of transactions closed during Q1 2020, GCC acquirers accounted for 92% while foreign acquirers accounted for 4%. The remaining 4% represents transactions for which the buyer information was not available. The market witnessed a similar pattern during the previous quarter in Q4 2019 as GCC acquirers accounted for 71% of the total number of closed transactions while foreign acquirers accounted for 24%.

Overall, a majority of the GCC acquirers preferred acquiring local or GCC companies as opposed to acquiring foreign targets. The UAE, Kuwait and Saudi Arabia were the most active players in terms of local activity while the remaining acquirers each closed one transaction in their home countries. In addition, the UAE surpassed its GCC counterparts and reported seven closed transactions that involved foreign targets whereas Bahrain, Kuwait and Saudi Arabia closed one transaction each. Lastly, neither Oman nor Qatar closed any transactions involving foreign targets.

Foreign Buyers

In comparison to the previous quarter, the market attracted a significantly lower level of interest from foreign buyers, which again, is in large part related to the global slowdown. Overall, there was only one transaction that closed that involved a foreign buyer, which is 92% lower relative to Q4 2019 and a decrease of 94% relative to Q1 2019. The one transaction that closed oversaw the Spanish company, Aqualia, acquire a 51% stake in Qatarat Saqia Desalination Company Ltd. for an undisclosed amount.

Sectorial View

The transactions that closed throughout the quarter spanned across multiple sectors which was also observed in the previous quarter. With that being said, the sectors that witnessed the greatest level of activity throughout Q1 2020 were the Financials, Information Technology and Industrials sector. These three sectors collectively accounted for almost 50% of the total transactions that closed throughout the quarter. Lastly, the quarter recorded activity in three new sectors and they are the Aviation, Construction and Telecommunication Services sectors.

Deals Pipeline

By the end of Q1 2020, there was a total of 14 announced transactions in the pipeline, which was the same as the previous quarter. Roughly 58% of these transactions involved UAE targets while the remaining portion equally involved both Kuwaiti and Saudi targets. Neither Bahrain, Oman nor Qatar had announced any transactions throughout the quarter.

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