Middle Eastern dealmaking has surpassed expectations so far in 2021. A total of 98 deals changed hands during the first three quarters—the same number as in all of 2020, with three months of dealmaking left in the pipeline.
Deal volume over the first three quarters of 2021 is already higher than in any Q1-Q3 period on Mergermarket record (since 2006). Deal value came to US$48 billion across the first three quarters, a 39% drop on the same period a year previous.
Saudi energy delivers bumper deals
The energy, mining and utilities (EMU) sector posted the highest value across all sectors, with US$28.8 billion in deals. The largest Q3 deal to take place within the sector, and also the largest of the year so far, was the acquisition of a 49% stake in Saudi oil producer Aramco’s pipeline business by a consortium led by US investment firm EIG Global Energy Partners.
Valued at US$12.4 billion, the transaction attracted a global group of investors, including Abu Dhabi's Mubadala Investment Company, Silk Road Fund, Hassana and Samsung Asset Management.
The second-largest deal of the year, and the largest to take place within Q3, also targeted Saudi’s energy sector: the US$12 billion asset acquisition and project financing of joint venture which will focus on air separation unit (ASU), gasification and power in Jazan Economic City. The joint venture is between Aramco, US-based Air Products, Riyadh-based ACWA Power and Air Products Qudra and will support Jazan as it looks to become a forerunner in clean energy production.
US bidders boost inbound M&A
Inbound activity dominated the top end of deal activity during the first three quarters, with three out of the top five deals of the year so far conducted by bidders located outside of the Middle East.
US firms continued to be the most active buyers in the region, with both the volume and value of deals undertaken by US buyers climbing to new highs. US inbound value over the first three quarters came to US$26.2 billion, already more than double the US$11 billion in 2020—the previous record high. The largest of these deals was the consortium acquisition of the Aramco pipeline company stake.
Outbound transactions top decade high
Outbound deal activity was strong in 2021. Middle East-based companies were involved in 136 outbound cross-border deals targeting businesses based outside of the region in the first three quarters of 2021. With three months left of activity to be summed, the number of outbound deals has already overtaken all annual totals for any year on Mergermarket record (since 2006) except for 2008, which saw 138 such deals.
Deal value also ticked up on 2020—the US$23.2 billion total for Q1-Q3 is already 46% higher than the total for all of the previous year.
The two largest deals both involved Dubai-based logistics firm DP World as bidder—a sign of consolidation in the global logistics sector amid upheaval and delays in global supply chains in the wake of the COVID-19 pandemic. The largest of these deals saw DP, which operates port terminals and maritime services globally, take over South Africa-based Imperial Logistics for US$1.7 billion, while the second-largest was DP’s US$1.2 billion acquisition of Syncreon, a US-based provider of supply chain solutions services.
Middle East-based sovereign wealth funds (SWFs) also continued to be active abroad in 2021. Four of the top ten largest outbound deals involved SWFs as buyers.
Regional dealmaking has emerged from a period of considerable uncertainty to reach new heights in 2021. Traditional drivers of M&A, such as interest in the region’s oil assets, have continued to generate activity within the top end of the market. Alongside these drivers, emerging trends such as the global push toward clean energy sources and interest from SPACs have helped produce the record activity witnessed so far this year.
The rebound in volume is particularly promising for the region’s dealmaking outlook—a sure sign that confidence has returned to the region following an unpredictable 2020.
The record numbers for inbound deals, particularly from the US, indicate that the region remains a safe bet for investment among international bidders. While economic recovery will inevitably be uneven across the region, there is every reason to expect that dealmaking will continue to build momentum moving into 2022.