GCC M&A transactions dropped in Q1 2020 by 51% due to COVID-19: Markaz
Financials, IT and Industrials sectors led transactions
Foreign buyers fall in Q1
KUWAIT: UAE’s logistics sector led 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 20percent 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 80percent of DP World’s existing share capital.
The second largest transaction was taken on by Qatar Petroleum, who acquired a 25 percent stake in Qatar Fertilizer 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 100percent 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 ITfocused 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 45percent stake worth $60 million in Advanced Aquaculture Company (the merged entity).
GCC M&A growth
According to Markaz’s report, the number of closed M&A transactions in the GCC during Q1 2020 decreased by 51 percent relative to Q4 2019, and by 52 percent 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 percent while foreign acquirers accounted for 4 percent. The remaining 4 percent 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 71percent of the total number of closed transactions while foreign acquirers accounted for 24 percent.
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 percent lower relative to Q4 2019 and a decrease of 94 percent relative to Q1 2019. The one transaction that closed oversaw the Spanish company, Aqualia, acquire a 51percent 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 50percent 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.
Pipeline deals