M&A market of Saudi Arabia to gain steam in 2021

Saudi Arabia was among the most active merger & acquisition (M&A) markets in the Middle East last year – a trend that is likely to persist through 2021. This is according to analysts by strategic consulting firm The Unit.

The estimates by The Unit, which has offices in Beirut and Riyadh, put Saudi Arabia among the top investment banking fee earners across Middle East and North Africa (MENA) for the third quarter of 2020 – a despite a rough start to a pandemic ridden year. In focus are international investments, which are driving the lion’s share of transaction growth.

According to Jamil Fakhri, Strategy Advisory and Corporate Finance Director at The Unit, this is a product of Saudi Arabia’s Vision 2030 programme – a government backed initiative aimed at modernising the kingdom and diversifying its economy beyond the oil & gas trade.

“As Saudi Arabia leaps ahead in its economic transformation in line with Saudi Vision 2030, the doors are open for international market players to expand their presence in the largest economy in the Region,” said Fakhri. The conditions are putting Saudi Arabia in a good position regionally as well.

Nearly $100 billion worth of M&A deals were clinched in the Middle East & Africa region last year according to Mergermarkets. The top five transactions accounted for more than half of this deal value, two of which were based in Saudi Arabia. Most notable is the $15 billion plus deal between The National Commercial Bank and Samba Financial Group.

According to The Unit, this momentum will persist through 2021, with a focus on certain sectors. Ecommerce has been among the big winners of lockdown, and will likely host significant transaction activity this year. Healthcare is another sector in stark focus – in urgent need of modernisation to boost crisis-preparedness.

Ongoing diversification efforts combined with a fundamental shift to renewables will draw attention to the energy landscape as well. These market factors aside, Fakhri expects the Kingdom’s targeted efforts to boost investment – new laws, regulations and economic incentives – to lead the charge in boosting the local M&A market.

“We are confident this factor will continue to drive greater interest from international investors. There is strong optimism in the local M&A market as Saudi Arabia remains committed to opening its economy and exploring new areas of investments.”

The Unit is itself at the forefront of deal activity. Since launching in 2006, the consulting firm has leveraged its management consulting and financial advisory expertise– transaction support, restructuring, and more – to advise on projects worth over $2.5 billion.

For Fakhri, the spurt of expected international investments will likely carve out more business for the firm. “We have seen M&A activities leveraging the capabilities of leading local companies for attenable go to market solutions.”