Dealmakers expect record year for UK-GCC M&A

The GCC region – in particular Saudi Arabia and the UAE – is seeing a “significant influx” of interest in mergers and acquisitions from UK investors.

Lumina Capital Advisers, a mid-market corporate finance company, told AGBI record levels of M&A activity are expected this year between the Gulf and the UK, based on a new survey of senior dealmakers.

The poll of corporates, professional advisers, private equity and sovereign wealth funds revealed that 80 percent of respondents are executing or have executed an M&A transaction in the GCC in the past 12 months.

About 40 percent of investors said they are seeking an inbound transaction in the Middle East in the next 18 months. A further 19 percent are looking at outbound activity.

It also showed that the average deal sizes have increased significantly since 2019, moving from less than $100 million to closer to $250 million.

Andrew Nichol, a partner at Lumina, said he has witnessed a 112 percent surge in inbound interest since 2019, underscoring the appeal of the UAE and Saudi Arabia.

“Deal sizes are increasing significantly. There is a marked increase in the use of debt, primarily driven by the access of sovereign wealth funds and quasi-government entities. However, the availability of such financing remains limited for private transactions,” he said.

According to the survey, most UK investors are eyeing the UAE as a regional base from which to focus on specific sectors in Saudi Arabia or using it to “buy and build” in the wider region.

Last month, Zencargo, a UK-based pioneer in digital freight forwarding, became the latest company to plan operations in the UAE as a platform to expand into Africa and South Asia.

The survey coincides with last week’s Abu Dhabi International Petroleum Exhibition Conference (Adipec), where more than 100 UK firms were exploring opportunities as the region seeks to accelerate energy transition efforts.

In August, Saudi-based Nesma & Partners signed an agreement to acquire Kent, a London-listed global energy services provider and a $1.4 billion revenue business.

Lumina said other key sectors are emerging, with infrastructure being the focal point in Saudi Arabia where a $900 billion spending plan is set to facilitate the development of giga-projects, incorporating advancements in sustainability, technology, and automation.

Healthcare and education are also sectors experiencing significant attention.

In August, UAE-based PureHealth signed an agreement to acquire Circle Health Group, the UK’s largest independent operators of hospitals, in a deal valued at $1.2 billion. In May, the Royal Commission for Riyadh City announced the opening of Reigate Grammar School in Riyadh.

The UK-based school, founded in 1675, is part of the international schools attraction programme, an initiative to attract major international schools to the Saudi capital, in partnership with the Ministry of Education and Ministry of Investment.

Lumina also said that consumer sectors are attracting interest from the UK, underscored by regional social and economic reforms, with a focus on entertainment, sports and gaming, food and beverage and retail.

“We are witnessing a distinct trend of internationals seeking regional access through joint ventures, partnerships and capabilities, with a pronounced focus on Saudi Arabia,” Nichol said.

“Simultaneously, the UAE plays a crucial role in sculpting the regional landscape, actively forming regional champions through consolidation acquisition strategies executed at a federal level.”

Equity remains a predominant choice for funding, with 76 percent of investors identifying it as the preferred method for acquisitions.

Debt is also a notable player, with 44 percent of investors surveyed using it as a source of transaction funding.

Last Updated on 1 year by News Desk 1