BrazilEY: Two thirds of Middle East CEOs to pursue M&A in 2022
Two thirds of CEOs in the Middle East plan to pursue a merger or acquisition in the next 12 months, with the majority of deals focused on future-proofing business strategies and operational capabilities, according to EY’s CEO Survey 2022.
On the back of a record-smashing year for M&A worldwide (2021 saw over $5 trillion in deals closed), the Middle East’s M&A market also enjoyed heightened activity last year, ending the year at approximately 650 deals compared to the typical pre-Covid-19 average of 450 transactions.
“We expect above-average M&A activity to continue in 2022 as MENA companies and government-related entities acquire bolt-on operations to strengthen core areas of their portfolio,” said Brad Watson, EY’s MENA Strategy & Transactions Leader.
Watson, who is based in EY’s Dubai office, added that both private and public sector entities will also continue to pursue above-average divestment activity, selling off non-core assets either to free up funds for strategic investments or for capitalising on the current seller’ market.
One trend expected to accelerate is geographic diversification, with 57% of CEOs in MENA saying that they are ramping up cross-border investments – significantly more than the 45% global average. “In 2021, the majority of the acquisition capital was deployed within the region. However, this year is clear that MENA companies feel a particular need for diversification.”
Asked what’s driving deals, CEOs worldwide told EY that increasing operational capabilities and innovation power is the top factor. Watson: “Pre-existing competitive landscapes have been redrawn across all sectors in the past 18 months, and there is more shifting of positions ahead.”
One-fifth of CEOs pointed at ESG as a driver. “We’re seeing a strong uptick in deals in the renewables space, but that’s just one part of the story. Across all sectors we’re seeing a strong desire to buy assets that accelerate sustainability strategies, especially in automotive, industrials and consumer – and that will likely continue at pace,” explained Andrea Guerzoni, EY’s Global Vice Chair for Strategy & Transactions.
In MENA, sustainability is a key priority for almost all executives, with 97% naming environmental, social and governance (ESG) principles ‘extremely or more important’ as a driver of value over the coming years, more than other parts of the world.
Of the respondents, 29% see sustainability as an opportunity to gain a competitive advantage. As such, a number of companies are looking to embed sustainability – in part through dealmaking – into their business strategies as they plan for the future.
