Negotiation of Middle East Agreements Advances in 2021 | White & Case LLP

Trading volume hit new highs as negotiators’ confidence in the region returns

The closing of deals in the Middle East has so far exceeded expectations in 2021. A total of 98 deals have changed hands in the first three quarters, the same number as for all of 2020, with three months of agreements in progress.

The trading volume in the first three quarters of 2021 is already higher than any Q1-Q3 period on Mergermarket record (since 2006). The deal was valued at US $ 48 billion in the first three quarters, down 39% from the same period a year earlier.

Saudi energy offers great deals

The energy, mining and utilities (EMU) sector posted the highest value of any sector, with $ 28.8 billion in transactions. The largest third-quarter deal to ever occur in the industry, and also the most important of the year to date, was the acquisition of a 49% stake in the pipeline operations of the Saudi oil producer. Aramco by a consortium led by US investment firm EIG Global Energy Partners.

Valued at US $ 12.4 billion, the deal has attracted a global group of investors, including Abu Dhabi’s Mubadala Investment Company, Silk Road Fund, Hassana and Samsung Asset Management.

The second-largest transaction of the year, and the largest to take place in the third quarter, also targeted the Saudi energy sector: the acquisition of US $ 12 billion assets and the project financing of a joint venture that will focus on the Air Separation Unit (ASU), gasification and electricity. in the economic city of Jazan. The joint venture is between Aramco, US-based Air Products, Riyadh-based ACWA Power and Air Products Qudra and will support Jazan as he seeks to become a forerunner in clean energy production.

U.S. bidders drive inbound mergers and acquisitions

Inbound activity dominated the high end of deal activity in the first three quarters, with three of the top five deals of the year so far from bidders located outside the Middle East.

US companies remained the most active buyers in the region, with the volume and value of deals completed by US buyers reaching new highs. Inbound value to the United States in the first three quarters amounted to $ 26.2 billion, already more than double the previous record’s $ 11 billion in 2020. The most significant of these transactions was the acquisition by a consortium of the stake in the pipeline company Aramco.

Outbound Transactions Reach Decade High

Outbound transaction activity was strong in 2021. Middle East-based companies were involved in 136 outbound cross-border transactions targeting companies based outside the region in the first three quarters of 2021. With three months of outbound transactions, Activity remaining to be added up, the number of outbound transactions have already exceeded all annual totals for any year on Mergermarket record (since 2006) except 2008, which saw 138 such transactions.

The value of the transaction has also increased compared to 2020 – the total of US $ 23.2 billion for Q1-Q3 is already 46% higher than the total for the whole of the previous year.

The two biggest contracts both involved Dubai-based logistics company DP World as a bidder – a sign of consolidation in the global logistics industry amid the upheavals and delays in global supply chains as a result. of the COVID-19 pandemic. The largest of those deals saw DP, which operates port terminals and maritime services around the world, buy out South Africa-based Imperial Logistics for $ 1.7 billion, while the second-largest was DP’s $ 1.2 billion acquisition of Syncreon, a US provider of supply chain solutions services.

Middle East-based sovereign wealth funds (SWFs) also continued to be active overseas in 2021. Four of the ten largest outbound transactions involved SWFs as buyers.

Outlook

Regional negotiation emerged from a period of considerable uncertainty to reach new highs in 2021. Traditional drivers of mergers and acquisitions, such as interest in the region’s oil assets, continued to generate activity in the high end of the market. Along with these drivers, emerging trends such as the global push towards clean energy sources and interest in after-sales service have helped produce the record activity seen so far this year.

The rebound in volumes is particularly promising for the region’s trading outlook, a sure sign that confidence has returned to the region after an unpredictable 2020.

The record number of inbound deals, especially from the United States, indicates that the region remains a safe bet for investment among international bidders. While the economic recovery will inevitably be uneven across the region, there is every reason to expect the agreements to continue to gain momentum through 2022.

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