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In 2023, dealmaking started slowly due to rising interest rates,  inflation, and economic uncertainty weighing heavily on M&A activity. However, the UAE led merger and acquisitions (M&A) activity in the Middle East in the first six months of the year with 82 deals valued at $6 billion and also as the top bidder country, with 115 deals valued at $20.2 billion, according to Ernst & Young’s first-half MENA M&A report.

The report said government policies and efforts drove deal flow and foreign direct investment into the country.

“Despite the marked drops witnessed across the board, the UAE remained the favored investment destination in the first half of the year, driven by government reforms that continue to attract investment into the country,” said Brad Watson, EY MENA Strategy and Transactions Leader.

However, overall deal activity across the region slowed during the six months, down by 14%; compared to H1 2022, deal value saw a slight increase of 0.4%. There were 318 deals amounting to $43.8 billion, according to the report.

The GCC region accounted for 254 of these deals, valued at $42.5 billion. 

The M&A activity in the broader region was led by government entities and sovereign wealth funds, with about 80% of total deals originating in GCC countries, according to EY.

Over half of all M&A deals in the region were cross-border, accounting for 85% of the total value. Outbound deals made up 32% of the total number of deals, but they accounted for 70% of the total value.

Government-related entities drove 68% of M&A deal value, worth US$29.9 billion, while transactions involving private equity (PE) or SWFs accounted for 53%.

In terms of sectors, the technology sector dominated, contributing $15 billion to the total MENA deal volume, followed by chemicals with $11.9 billion and provider care with $3.3 billion.

UAE was the most active target and bidder country in MENA M&A in H1 2023, followed by KSA and Kuwait.