The Middle East’s mergers and acquisitions (M&A) landscape in 2024 reveals a tale of two markets: robust outbound activity and a subdued regional deal environment. Outbound deals, driven by strategic plays in energy, technology, and industrial sectors, have maintained strong momentum, while domestic transactions within the region have declined sharply.
Samuele Bellani, Managing Director and Partner at Boston Consulting Group (BCG), provided key insights into the dynamics shaping this duality. “Outbound activity in the Middle East continues to thrive, demonstrating the region’s commitment to diversifying its investments and expanding its global footprint,” Bellani stated. “However, M&A targeting regional companies has not been able to sustain the pre-pandemic highs.”
Outbound M&A: Driving Growth
Middle Eastern buyers are increasingly focusing on outbound deals as a core growth strategy. A standout transaction in 2024 is ADNOC’s $12.5 billion acquisition of German chemicals giant Covestro, marking the first purchase of a German blue-chip company by a Middle Eastern buyer.
“This transaction is a cornerstone of ADNOC’s global growth strategy, solidifying its position in performance materials and specialty chemicals,” said Bellani. “It exemplifies the ambition of Middle Eastern firms to compete on a global stage.”
Other notable outbound deals include Masdar’s $2.7 billion acquisition of renewable energy company Terna Energy, ADNOC’s $1 billion purchase of logistics player Navig8, and UAE-based Presight AI’s $350 million investment in energy-focused AI firm AIQ.
“These deals highlight the strategic focus on sectors that align with the global energy transition and digital transformation,” Bellani added.
Decline in Regional Activity
While outbound M&A flourishes, the value of transactions targeting companies within the Middle East has dropped significantly. Data from the first nine months of 2024 shows a 45% decline in regional deal value compared to the same period in 2023. This contrasts starkly with the 10% rise in global deal values over the same period.
In terms of deal volume, the region saw a modest 7% increase, bucking the global trend of a 13% decline. However, the increase in smaller, strategic transactions has not offset the decline in larger deals.
Bellani noted, “The decline in regional M&A activity reflects a cautious approach among investors amid global economic uncertainty and a lack of large-scale opportunities within the Middle East.”
Sector Highlights
Despite the overall decline, several sectors have witnessed noteworthy activity:
- Industrial
- ADNOC’s $1 billion acquisition of Navig8 underscores the strategic importance of logistics in the region.
- In engineering, Dar Al-Handasah made headlines with a $3.2 billion bid for the John Wood Group, although the offer was ultimately rejected.
- Technology and Telecommunication
- Tech and telecom are increasingly central to the region’s M&A landscape. Bayanat AI’s $2.6 billion bid for Al Yah Satellite Communication and UAE-based Rowad’s $250 million acquisition of Uganda Telecommunications are key examples.
- Presight AI’s investment in AIQ further illustrates the growing appeal of artificial intelligence and its applications in the energy sector.
- Energy
- The energy sector remains pivotal, with transactions reflecting a dual focus on renewable energy and hydrocarbon monetization.
- Masdar’s acquisition of Terna Energy highlights the region’s commitment to clean energy, while ADNOC and Saudi Aramco continue to dominate the global downstream oil and gas space.
Country-Specific Trends
The UAE has solidified its position as the region’s leader in M&A, recording the highest deal value at $1.5 billion and leading in transaction volume with 98 deals in 2024. Saudi Arabia follows with 47 deals valued at $987 million, while Kuwait ranks third with 10 deals totaling $1.1 billion.
“The UAE’s leadership in M&A underscores its proactive approach to economic diversification and its ability to attract international and domestic investments,” said Bellani.
Outlook: Challenges and Opportunities
Looking ahead, several factors will shape the Middle East’s M&A prospects:
- Sustained Outbound Activity
- “Middle Eastern buyers will continue to seek opportunities abroad, driven by sovereign wealth funds and corporate ambitions to expand globally,” Bellani remarked.
- Economic Diversification
- Governments and companies face increasing pressure to reduce reliance on oil and gas by investing in sectors like technology, renewable energy, and advanced manufacturing.
- Global Uncertainty
- Political tensions and economic challenges, including regulatory scrutiny in sectors like technology and finance, could hinder cross-border deals.
- Slower-than-expected global growth may lead to a cautious approach among regional players.
- Capital Market Development
- “The rapid development of capital markets and the sharpening focus of sovereign wealth funds on optimizing their portfolios will play a crucial role in supporting dealmaking,” Bellani said.
Long-Term Prospects
Despite near-term challenges, the Middle East is well-positioned for long-term growth in M&A. The region’s sovereign wealth funds, robust capital markets, and commitment to diversification provide a strong foundation for dealmaking.
“The Middle East’s ability to adapt to global trends and leverage its unique strengths will be key to unlocking the full potential of its M&A landscape,” concluded Bellani.
This dual narrative of thriving outbound deals and subdued regional activity underscores the complexities of the Middle East’s M&A market. However, with strategic investments and an evolving focus, the region is poised to navigate these challenges and capitalize on emerging opportunities.
