Geopolitical Uncertainty Casts Shadow on MENA M&A Activity

Merger and acquisition (M&A) activity in the Middle East and North Africa (MENA) region is facing headwinds due to rising global tensions, according to a recent report by Bain & Company. While the region experienced a 4% increase in M&A deals in 2023 compared to the previous year, with a total value of $86 billion, experts warn that this momentum could be short-lived.

The report highlights the ongoing conflict between Israel and Palestine as a significant contributor to the uncertain geopolitical landscape. This particular conflict, alongside the broader global tensions, is causing investors to adopt a more cautious approach, potentially leading to a decline in M&A activity in the region.

Despite these concerns, the report also acknowledges the MENA region's inherent resilience and its ability to navigate complex geopolitical situations. The report points to the significant role played by sovereign wealth funds (SWFs) in the region, such as the Abu Dhabi Investment Authority (ADIA) and the Public Investment Fund (PIF) of Saudi Arabia, which continue to drive deal activity to support national economic diversification strategies.

One example of such activity is the UAE's largest M&A deal of 2023, the $8.2 billion acquisition of Univar Solutions by Apollo Global Management and ADIA. This deal, along with others like the $4.9 billion acquisition of US mobile games developer Scopely by PIF-owned Savvy Games Group, highlights the continued interest of SWFs in strategic investments that contribute to their diversification goals.

Furthermore, the report emphasizes the ongoing trend of domestic M&A activity within the MENA region. While cross-border deals still contribute significantly to the overall value, accounting for 72% in 2023, domestic deals represent nearly half of the total volume, indicating a focus on consolidation and regional growth. This trend is expected to continue, driven by factors such as increasing intra-regional trade and investment.

Looking ahead, the report suggests that the future of M&A activity in the MENA region will depend heavily on the evolution of the geopolitical landscape. If tensions continue to escalate, it could lead to a further slowdown in deal activity. However, the report also underscores the region's potential for continued growth, highlighting the presence of strong fundamentals, supportive government policies, and a growing pool of domestic and international investors.

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