Saudi Arabia and UAE Drive M&A Activity to US$10 Billion in H1 2024, Enhancing MENA’s Global Influence

In the first half of 2024, MENA M&A activity surged to US$49.2 billion, with Saudi Arabia and the UAE leading with US$10 billion in deals, driven by strategic investments from sovereign wealth funds and a rise in cross-border transactions. Key sectors include insurance and real estate, with significant regional and global expansions highlighting the growing economic influence of the Gulf countries.

By Giulia Interesse

In the first half of 2024, the Middle East and North Africa (MENA) region experienced notable growth in merger and acquisition (M&A) activity, with total deals reaching US$49.2 billion across 321 transactions.

A significant portion of this activity was driven by Saudi Arabia and the United Arab Emirates (UAE), which together contributed to 152 deals valued at US$9.8 billion. These countries played pivotal roles as both acquirers and targets, reinforcing their strategic positions within the regional M&A landscape.

The latest report by EY indicates the critical contributions of sovereign wealth funds (SWFs) from Saudi Arabia and the UAE in driving these transactions. Notably Saudi Arabia’s sovereign wealth fund and UAE’s Abu Dhabi Investment Authority and Mubadala have been key in advancing their countries’ economic strategies through strategic investments. This proactive approach fosters a vibrant M&A environment that aligns with their broader economic objectives.

Additionally, the rise in cross-border M&A, driven by companies aiming to expand and gain strategic advantages, has been notably supported by the UAE’s investor-friendly regulations.

In this article, we delve into the key drivers behind the surge in M&A activity, the influential role of sovereign wealth funds, the dynamics of cross-border transactions, and the prominent sectors and geographic regions shaping the MENA economic landscape.

Key drivers of M&A growth

Role of sovereign wealth funds

SWFs from Saudi Arabia and the UAE, notably the Public Investment Fund (PIF), Abu Dhabi Investment Authority (ADIA), and Mubadala, have taken center stage in shaping the M&A landscape within the MENA region. These funds are not just passive pools of capital; they are dynamic, strategic entities influencing regional economic currents. Through their M&A activities, these SWFs reflect a deep commitment to their national economic agendas, notably in diversifying away from traditional oil-based revenues.

The strategic investments by these funds across various sectors, including technology, energy, and finance, play a pivotal role in broadening the economic base of their respective countries. By channeling capital into these critical sectors, the SWFs help fortify the region’s competitive edge globally, ensuring that it remains a key player on the international economic stage.

Cross-border M&A surge

The first half of 2024 has witnessed a pronounced surge in cross-border M&A activities, which now represent 52 percent of the total transaction volume and an impressive 87 percent of the overall transaction value. This marks a robust 15 percent year-on-year increase in value. Such figures underscore a strategic shift towards globalization by MENA-based companies, driven by the pursuit of synergy creation, market expansion, and securing competitive advantages on a global scale.

To better grasp this trend, it’s important to consider the UAE as an appealing destination for global investors, thanks to its business-friendly regulations and streamlined legislative frameworks. These aspects position the UAE as a premier hub for launching international ventures and attracting foreign investment, solidifying its role as a focal point for extensive cross-border M&A activities.

Concentration of high-value transactions

The most significant financial deals within the MENA region during the first half of 2024 were primarily concentrated in the Gulf Cooperation Council (GCC) countries. Notably, the largest transaction was the purchase of Truist Insurance Holdings in February 2024. This deal involved Clayton Dubilier & Rice, Stone Point Capital, and Mubadala Investment, totaling US$12.4 billion. This acquisition shows the GCC’s capability to execute high-stake transactions that have considerable economic impacts.

In another major transaction, March 2024 saw a substantial investment of US$8.3 billion by PAG, Mubadala, and the ADIA into Zhuhai Wanda Commercial Management Group. This investment is part of a strategic expansion into the Asian markets and reflects the broader goals of MENA-based funds to diversify their portfolios and extend their influence into global markets.

The engagement in such high-value, cross-regional deals highlights the MENA region’s growing significance in shaping global market dynamics.

Sectoral focus and trends

Insurance and real estate as leading sectors

Insurance and real estate sectors emerged as significant contributors to the MENA region’s M&A landscape, collectively accounting for 47 percent of the total deal value in the first half of 2024.

The insurance sector is seeing a surge in investments due to increased risk management needs across industries, while the real estate sector continues to benefit from urban expansion and the rise in tourism and hospitality developments.

Role of ESGs

ESG considerations are rapidly gaining traction among investors in the MENA region, reflecting a broader global shift towards sustainability and responsible investment. In response to international climate goals and regional economic diversification efforts, MENA countries are increasingly embedding ESG criteria into their regulatory frameworks and investment strategies.

The recent COP 27 in Egypt and the COP 28 in Dubai underscore this commitment, with the UAE leading the way through initiatives like the UAE Vision 2021 and the Dubai 2040 Urban Master Plan. Both local and foreign investors are prioritizing ESG performance in M&A decisions, with nearly half of respondents citing it as a top priority.

Geographic trends in M&A activity

Aside from Saudi Arabia and the UAE, Morocco, Bahrain, and Egypt were also prominent both as targets and bidders in the M&A transactions, indicating their strategic importance in the MENA region’s economic landscape.

This geographic distribution highlights not only the vibrant market activity within these countries but also their roles in fostering regional partnerships, enhancing the integration and cooperation across the MENA economies.

Domestic vs. outbound M&A activity

Increase in domestic deals

The first half of 2024 witnessed a 13 percent year-on-year increase in domestic M&A transactions, which totaled US$4.6 billion. Notably, 94 deals occurred between entities within and between the UAE and Saudi Arabia, illustrating a significant focus on intra-regional consolidation and growth.

Outbound M&A activity

Outbound M&A deals were particularly notable, with 96 transactions amounting to UA$36.3 billion, reflecting an assertive international investment strategy by MENA countries. These deals were largely directed towards high-value strategic acquisitions in foreign markets, contrasting with the US$6.4 billion recorded across 70 inbound deals.

The disparity highlights the aggressive expansion and diversification approach adopted by MENA countries, aiming to cement their presence on the global stage.

Outlook

As global economies grapple with recessionary trends, the MENA region, led by Saudi Arabia and the UAE, stands out for its resilience and dynamic M&A activity. Despite broader economic uncertainties, these countries have demonstrated considerable strength, positioning themselves as key players in the global deal-making arena.

In Saudi Arabia and the UAE, elevated oil prices have been a significant driver of economic confidence and growth. The high price of crude oil, though volatile, continues to support robust economic conditions in the Gulf. This buoyancy is evident in the vigorous participation of state-linked organizations in the M&A market, as they seek to diversify their assets beyond traditional oil revenues. This strategic diversification is not only a response to the fluctuating oil market but also a proactive approach to sustaining long-term economic stability.

Moreover, both Saudi Arabia and the UAE are undergoing significant market liberalization, making their economies increasingly attractive to foreign investors. Recent policy shifts, including the removal of ownership caps on companies, have opened up new opportunities for strategic mergers and private equity investments by international players. This liberalization is a crucial factor fueling the surge in inbound M&A activity, as it aligns with broader global investment trends and enhances the appeal of these markets.

In terms of sectoral focus, while oil and gas continue to be important, there is a clear shift towards Technology, Media, and Telecom (TMT) sectors, as well as ESG. Saudi Arabia and the UAE are emerging as vibrant hubs for tech innovation, driven by a growing number of high-profile startups and tech initiatives. The UAE, for instance, has seen notable successes with unicorns such as the transit app Swvl and the cloud-kitchen platform Kitopi, which are attracting significant attention and investment. This shift reflects a broader trend towards sustainable and forward-looking investments, aligning with global ESG considerations and the region’s own economic diversification goals.

Political stability has also played a pivotal role in enhancing the attractiveness of Saudi Arabia and the UAE to international investors. The relative calm in these countries has renewed confidence in their economic prospects. This stability, coupled with a proactive approach to market reforms and economic diversification, is encouraging more global investors to engage with the region, further boosting its role in the global economic landscape.

All in all, as the MENA region continues to grow in influence, Saudi Arabia and the UAE are at the forefront of this transformation.

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