GCC M&A surge: A blueprint for sustainable growth

The Middle East’s mergers and acquisitions (M&A) market is poised for robust growth this year after a downbeat 2023, supported by national visions such as Vision 2030, government initiatives and growing strategic interest from regional and global players alike.

The GCC, especially the UAE and Saudi Arabia, led the Middle East in dealmaking, both in terms of volume and valuation, underscoring their significant role in the region’s M&A landscape. Global consultancy firm EY said that the two GCC countries were the preferred destinations for investors in the January-June period, with 152 deals valued at $9.8bn.

The Gulf region, once known primarily for its vast oil reserves, is charting a new course guided by the leadership’s continuity and commitment to accelerate economic reforms. GCC countries’ trillion-dollar makeover, fuelled by the financial strength of their sovereign wealth funds, is driving a surge in both domestic and cross-border M&A activities.

Sovereign funds, such as Abu Dhabi Investment Authority (ADIA) and Mubadala from the UAE and Saudi Arabia’s Public Investment Fund, continue to lead the deal activity globally to support the GCC countries’ economic strategies.

Building on last year’s momentum, the GCC’s M&A landscape in 2024 exudes optimism. With ample capital at their disposal, sovereign wealth funds, family offices and corporations are eager to invest and deploy resources.

Investing in the future

The GCC’s M&A landscape is more vibrant than ever, driven by a confluence of factors that have positioned the region as a hotspot for transformative business activities.

For decades, the GCC economies have been closely linked to the oil and gas industry, but in recent years, a clear shift has occurred as regional governments are steering towards a future less reliant on oil revenues.

The resilience of GCC economies has strengthened regional stability and investor confidence, leading to an active deal market as sovereign funds from the region are supporting government-led economic diversification initiatives.

The Gulf region’s deep-pocketed sovereign funds are deploying billions of dollars to expand their global reach and deepen their foray into global markets through diversified sectoral buys. With a combined $4.1tn in assets under management, GCC wealth funds have increased both foreign and domestic investments to support local economies while creating wealth for future generations.

Global data provider GlobalSWF said in June that GCC wealth funds reached their highest levels of global dealmaking in about 15 years, deploying $38.2bn across 58 different deals in the first half of 2024.

Saudi Arabia’s PIF has been weighing options to bolster equity offerings in its portfolio companies as it seeks to create new sources of cash to help fund the kingdom’s economic transformation agenda under Vision 2030.

The fund agreed to buy a majority stake in stc Group’s tower unit TAWAL for $2.3bn (SAR8.7bn) in April and plans to merge it with other local assets to create a new mobile tower giant. It completed the acquisition of a 40 per cent stake in Zamil Offshore in February, an investment that is expected to bolster the company’s capital base.

PIF injected $1.5bn in cash in Lucid Group as the electric vehicle maker looks to ramp up production of its much-awaited Gravity SUV, bringing the state investor’s investment in the automaker to a total of about $8bn. The fund invested $10.2bn in the January-June period, according to GlobalSWF.

ADQ, the smallest of Abu Dhabi’s three main sovereign wealth funds, has emerged as one of the region’s most active dealmakers.

The strategic state investor agreed to buy a minority interest in Sotheby’s, a fine art and secondary market luxury auction house, in August. It also acquired a 49 per cent stake in Alpha Dhabi’s construction subsidiary, Alpha Dhabi Construction Holding.

Abu Dhabi’s Mubadala and ADIA joined a PAG-led consortium in March to buy a 60 per cent stake in the Chinese shopping mall company Zhuhai Wanda Commercial Management Group for $8.3bn. Mubadala, together with Clayton Dubilier & Rice and Stone Point Capital, also acquired Truist Insurance Holdings for $12.4bn in February – the largest transaction in the first half of 2024.

Sovereign funds from the Gulf region are leveraging recent oil revenue surpluses to strengthen their domestic investment pipeline and expand globally through strategic, diversified acquisitions across various sectors.

Capitalising on diversification

The GCC’s deal market is a promising landscape, as the broader MENA region registered a slight increase in M&A activity in the January-June period, with 321 deals amounting to $49.2bn compared to the corresponding period a year ago.

“Dealmaking got off to a promising start in 2024 despite oil price fluctuations. We saw a surge in cross-border M&A value as companies made investments to further build synergies, expand market presence, and gain strategic advantages on a global scale,” said Brad Watson, EY MENA Strategy and Transactions leader.
“The first half of the year found the UAE to be a favoured investment destination due to its business-friendly regulations and efficient legislative framework.”

Masdar, also known as Abu Dhabi Future Energy Company, is hunting more opportunities in Europe following the acquisition of a 49.99 per cent stake in 48 solar plants controlled by Endesa for $887m (EUR817m) in July. The renewable energy firm also agreed to buy a 67 per cent stake in Greece’s Terna Energy.

Abu Dhabi investor Lunate and Saudi conglomerate Olayan Group agreed to acquire a 49 per cent stake in ICD Brookfield Place, a major commercial property in Dubai’s financial hub, in April.

Furthermore, Saudi Arabian media giant MBC, through its MBC Ventures arm, acquired nearly a 14 per cent stake in Anghami, the largest streaming service provider in the Middle East, in March.

Abu Dhabi National Insurance Company (ADNIC) expanded its regional footprint in April by acquiring a 51 per cent shareholding in Saudi Arabia’s Allianz Saudi Fransi Cooperative Insurance Company. The deal gives the insurer active field operations in the two largest and fastest-growing markets in the Middle East region.

Going forward, the surge in dealmaking in the first half of the year, coupled with a positive economic outlook, positions the GCC region as a major player in the Middle East region’s M&A landscape.

The region’s M&A momentum transcends traditional sectors, with robust deal flow seen in established sectors such as real estate, hospitality and infrastructure, as well as emerging sectors in line with global trends such as technology, renewable energy, and healthcare.

Read: How GCC sovereign funds are conquering global markets