Middle East banking M&A deals touch $7b in 2012

By Shweta Jain, Senior Reporter, the Gulf News

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Dubai: The Middle East posted a strong jump in banking M&A (mergers and acquisitions) deal values in 2012, to nearly $7 billion, up from $1.5 billion in 2011, according to a study by global consulting firm PwC.

This was a result of six transactions in the period, even as the total number and value of global banking M&A transactions have declined steadily over the past few years, PwC said in a statement on Sunday, emphasising that high oil prices and the associated flow of money through the Middle East economy helped banks in some parts of the region to maintain high levels of liquidity.

“The Middle East stood out as an exception in 2012,” PwC said in a statement, adding that banking deals have consistently accounted for the majority of financial services M&A globally over the past decade.

The PwC analysis comes shortly after Thomson Reuters said last week in a similar report that Middle East M&A activity recorded $5.1 billion in first quarter of 2013, 10 per cent less than the $5.7 billion witnessed in the region during the same period last year. The region’s investment banking fees, meanwhile, reached $143.5 million in the quarter, marking the best first quarter for fees in the region since 2008.

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According to PwC, however, Middle Eastern banks’ appetite for outbound M&A has been selective and led by Qatari institutions.

“While the increase in the value of deals in the Middle East from $1.5 billion to nearly $7 billion was in part attributable to broader restructuring efforts in the region, it also points to confidence on the part of certain Middle Eastern banks to invest beyond their domestic markets”, Hani Ashkar, Middle East Deals Leader at PwC, said in a statement. He added that the six banking M&A deals that took place in the region last year included multiple landmark overseas investments by Gulf based banks, notably in Egypt, “as certain European players confirmed their retrenchment from emerging and non-core markets”.

The consulting firm further stated that there is continued interest in nearby growth markets such as Turkey, European private banking assets and around the growing role of Islamic Banking in Central Asia and the Far East.

According to Raymond Hurley, Director responsible for FS Deals in PwC Middle East, a number of the Middle East banks rank among the “most stable and well capitalised” banks globally.

Another global consulting firm, Ernst & Young (E&Y), said in February that Mena (Middle East and North Africa) M&A deal values increased from $31.6 billion in 2011 to $44.8 billion in 2012, marking a 42 per cent jump, as the UAE and Qatar lead regional deal activity.

Projecting an improvement in the activity for 2013, Phil Gandier, Mena Head of Transaction Advisory Services at Ernst & Young, had said there may be an improvement in the valuation gap amongst buyer and sellers in the market in 2013 compared to last year where total deal values were “considerably lower”.

“As 2013 unfolds there is an anticipation that the improvement in deal activity in 2012 will further improve as we start to see market conditions continually improving despite the unpredictable macroeconomic landscape,” he said.