Trade and investment between the Middle East and Asia-Pacific (APAC) regions is booming, underpinned by restored bilateral relations between Saudi Arabia and Iran—brokered by China—and renewed economic growth potential. The bond has tightened over recent years, with Asia’s dependence on energy imports a major reason for the growing interdependence. Meanwhile, the West’s separation from Russia has arguably pushed Eastern regions to become more cooperative.
With growing trade and investment come more opportunities for M&A. Both regions are taking advantage of deal opportunities to expand outside of their borders, acquire cutting-edge technologies and add new skills and capabilities.
Middle Eastern M&A into APAC posts new record
Dealmaking by Middle Eastern companies targeting the APAC region posted an all-time high value in 2023—a total of US$12 billion. The bulk of this figure represents deals with Chinese targets, which accounted for US$8.7 billion of total value. Volume has also been strong, with a healthy pipeline of deals coming to market. A total of 45 deals changed hands throughout 2023—the highest figure since 2016.
Meanwhile, M&A in 2024 has also been solid, if not up to the record-breaking levels of 2023. In the first six months of the year, there were 18 deals valued at US$2.8 billion.
Investment and trade are also flourishing. Gulf Cooperation Council (GCC) trade with Emerging Asia is expected to reach US$757 billion by 2030, almost doubling the value achieved in 2021, highlighting the growing strategic bond between the two regions.
A major driver of this activity is Asia’s growing middle class. According to recent figures, in the year ahead, the region will be home to 80 percent of the world’s “new consumers”—those able to spend $12 or more per day—which is spurring investment in the region. For this reason, consumer-facing sectors in the region are becoming more attractive for cross-border transactions.
SWFs moving into APAC
Middle Eastern sovereign wealth funds (SWFs) have also become increasingly active in Asia as governments seek to diversify their economies and bring innovation into the region. The Gulf’s SWFs invested a total of US$8.5 billion to increase their ties to Asia during the first three quarters of 2023—a nearly 60 percent rise compared to 2022. State-owned investors from the UAE and Saudi Arabia are leading the way, with big players such as Saudi’s Public Investment Fund (PIF), Abu Dhabi Investment Authority and Qatar Investment Authority all active in Asia.
A mission for transition
The global energy transition has also been driving interest from Gulf states into Asia. The largest electric vehicle deal of 2023 saw China-based Tesla competitor Nio receive a US$2.2 billion investment from CYVN Holdings, giving the Emirates-based company a 20 percent shareholding. The deal aims to give Nio a boost as it comes under financial pressure from a price war initiated by US rival Tesla.
The UAE was also responsible for the two largest M&A deals by a Middle Eastern bidder targeting APAC so far in 2024. The biggest was ADNOC Logistics and Services’ (L&S) purchase of an 80 percent stake in Singapore-based Navig8, valued at US$1 billion. The acquisition of the shipping pool operator, which owns of fleet of 32 modern tankers across five continents, fits with ADNOC L&S’s global expansion plans.
The second-largest deal saw Abu Dhabi state-controlled fund ADQ acquire a 49 percent stake in Australian infrastructure investor Plenary for US$650 million. The funding will allow Plenary to pursue its growth plans. This will include the creation of a co-investment platform focusing on public and social infrastructure opportunities in the GCC region, the Middle East and Central Asia.
APAC challenges
Despite the opportunities on offer, Middle Eastern investors and acquirers face challenges when looking to enter the APAC market. Investors could face pressure from the US not to invest in certain Chinese technologies, particularly AI, with a restriction of sales potentially hurting the growing Middle East-China relationship. The US recently placed pressure on the UAE to cut ties with Chinese tech conglomerate Huawei after it had allowed access to its telecommunications networks.
Restrictive and widely varied data regulations are another hurdle and could stand in the way of wider data sharing and deal opportunities.
While challenges are there to be overcome, the rate of trade and investment from the Middle East into the APAC region shows no sign of abating. This trend will ensure that dealmaking ramps up over the years to come as businesses continue to pursue their strategic expansion plans.
APAC bidders eye Middle East targets
While reciprocal investment from APAC into the Middle East has so far been more muted, activity looks set to grow. A total of 33 deals valued at US$4 billion took place in 2023, with Israel, the UAE and Oman as the top investment targets. Activity has been relatively slow to pick up so far in 2024, with just nine deals valued at US$260 million taking place. Israel is proving a key target location for tech-hungry dealmakers, while the UAE and Qatar are also hotly targeted.
China is becoming an active presence in the region. At the tenth Arab-China Business Conference held in Riyadh in June 2023, a reported 30 deals worth US$10 billion were agreed between Chinese companies and Middle Eastern investors.
Notably, Chinese tech companies, facing stringent regulation from Western powers along with an economic slowdown at home, are becoming increasingly assertive in the region. Food delivery giant Meituan, for example, is seeking to hire staff in Riyadh—a significant move and the company’s first step outside of its home country. Chinese e-commerce giant Alibaba, meanwhile, is partnering with local companies in Saudi Arabia and the UAE as it looks to make inroads into the region.
The largest M&A deal of 2023 saw an Indonesian energy company target Oman’s oil and gas sector. In August, Jakarta-based MedcoEnergi (MEDC) was granted approval from the Sultanate of Oman to acquire a 20 percent stake in two oil and gas blocks from local energy company OQ Exploration & Production. The acquisition will boost MEDC’s daily production and contribute to future oil and gas reserves.
Israel’s globally renowned TMT industry is also being hotly targeted by Asian bidders. The sector has generated several significant deals in the past two years, including Australian Aristocrat Leisure’s US$1.2 billion acquisition of iLottery solutions provider NeoGames, as well as South Korean booking app Yanolja’s US$121 million purchase of travel tech company MST Travel.
Yet challenges remain. The ongoing conflict in the region has had a de-stabilizing effect, making the prospect of future investments uncertain. While this does not yet appear to be a major deterrent for deals, further escalation could dampen investor appetite.
Varying regulations concerning data sharing is another hurdle and would need careful consideration.
The burgeoning relationship between the Middle East and APAC looks set to solidify further over the coming months and years. In a shifting macroeconomic and geopolitical climate, the Gulf states and Asia will increasingly look to each other for economic support and growth—a trend reflected in soaring trade figures and a healthy M&A pipeline.
