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[April 20, 2014]
Middle East and Africa sees increased M&A activity [Gulf News (United Arab Emirates)]
(Gulf News (United Arab Emirates) Via Acquire Media NewsEdge) Dubai: Mergers and acquisitions (M&As) in the Middle East and Africa markets are seen picking up pace this year in the context of increased foreign direct investment (FDI) flows in the wake of decelerating growth in China, Brazil and India.
The deal flows in the first quarter of the year indicate that a revival in economic growth and improving financial markets are luring international investors to the region. Philips, the Dutch electronics manufacturer, last month agreed to buy a stake in Saudi Arabia's General Lighting. Warburg Pincus bought a majority stake in a Dubai aviation software company owned by Emirates' Dnata unit.
According to the first quarter statistics on regional M&As from Thomson Reuters fees from completed M&A transactions totalled $46.4 million, up 19 per cent from the same period in 2013 with Lazard topping the Middle Eastern completed M&A fee league table.
Overall global M&A decreased by 13 per cent during the course of 2013. KPMG International's latest High Growth Markets International Acquisition Tracker shows that rising domestic confidence in many developed markets is not yet translating into an increase in cross-border acquisitions.
Deals between developed market acquirers and high growth market targets (D2H) continued the downward trend of the last three years, falling back to 2009 levels in the second half of 2013.
On the other hand, high growth market acquirers appear to be more proactive, prioritising deals in developed markets over investments in other high growth markets. Currency fluctuations also appear to be influencing the pattern of deals coming out of key high growth markets, such as South America. "Globally speaking, the vehicle powering deals involving high growth markets is stuck in neutral," said Tom Franks, KPMG's Global Head of Corporate Finance. "We are seeing a trend towards high growth markets acquiring in developed markets in order to diversify their portfolios. But currency movements have significantly hampered those efforts, particularly in markets in South America" According to UNCTAD's annual survey on investment trends, foreign direct investment flows into African nations increased 5 per cent during 2013, surpassing $50 billion a year. This growth took place at a time when global FDIs reduced by approximately 18 per cent over the same period.
"As deal flows improve and untapped opportunities emerge, it is inevitable that Africa will experience a pick-up in investment activity. Not surprisingly, we have seen firms, both globally and in the Mena region, increasing their focus on Africa" said Vikas Papriwal, KPMG UAE's Head of Transactions and Restructuring.
M&A activity within the Middle East is also on the rise. Recently Danone and The Abraaj Group announced a partnership agreement whereby Danone will join Abraaj in the acquisition of Fan Milk International. Fajr Capital recently announced it has acquired a substantial minority stake in a leading GCC-based engineered components manufacturing company. The company has a solid footprint in the MENA region, with a proven track record in exporting high quality machined components to the US and European markets.
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