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Sovereign wealth funds accelerating M&A activity in the Middle East, says a new report

The wealth funds are acquiring to build local champions, and invest in strategic industries of the future.

Sovereign wealth funds accelerating M&A activity in the Middle East, says a new report
[Source photo: Anvita Gupta/Fast Company Middle East]

Middle Eastern sovereign wealth funds are embracing mergers and acquisitions (M&A) to scale into new industries and create regional leaders, according to Bain & Company’s annual Global Mergers & Acquisitions study.

According to the report, the action will also improve collaborations, make investments in the future, and support the area.

In 2022, regional M&A activity grew by about 39%, partly due to the influence of sovereign wealth funds owned by the government. Private equity investors participated in only a small number of transactions, making up 84% of all deals between sovereign wealth funds and businesses.

According to the analysis, sovereign wealth funds are buying up with these objectives in mind: build local champions, invest in strategic industries of the future, and market entry into new verticals.

According to the report, the region is well positioned to rely on M&A to advance the long-term push to expand beyond hydrocarbons and globalize its companies.

Furthermore, the report added that the Middle East’s sovereign wealth funds are growing, along with the economy, and have become a “treasure chest for much of the M&A activity.”

In August 2022, four Egyptian businesses, including Abu Qir Fertilizers and Alexandria Container and Cargo Handling, received a $1.3 billion investment from Saudi Arabia’s Public Investment Fund (PIF), according to the report.

On the other hand, private equity activity is scarce in the area and has decreased by 36% in the first ten months of 2022. However, the report stated there are some indications that the growing IPO market is reviving interest among companies preparing for them.

Companies are acquiring businesses or developing alliances to saturate regional markets in critical industries, as seen in the merger of Saudi British Bank and HSBC Saudi Arabia or the cooperation between Etihad and Air Arabia.

In the years ahead, the report stated that more international companies would explore the cross-border possibilities of partnering with sovereign wealth funds and local authorities to create new sectors through joint ventures.

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