Gulf SWFs and PE firms have substantial financial resources to support significant M&A activity.
The Middle East’s M&A sector experienced a deceleration in 2022, with both corporate and financial investors adopting a cautious stance due to surging interest rates and growing economic unease. Although M&A transactions sustained their robustness during the initial months of 2022, they lost momentum as the macroeconomic situation progressively worsened throughout the year.
The year 2022 has presented several economic and financial challenges that have made dealmaking a complex task on a global scale. Among the main obstacles has been the constricting credit environment, with banks limiting their funding for leveraged buyouts due to increasing interest rates and an overall aversion to risk. As a result, the issuance of leveraged loans to support private equity (PE) acquisitions have mostly come to a halt in Europe and the Middle East.
Despite the global challenges, the Middle East has experienced a modest decrease in the number of deals, from 366 in the first nine months of 2021 to 343 in the same period in 2022. The UAE, Saudi Arabia, and Israel were the most sought-after countries by buyers, with companies headquartered in these locations representing 20.7%, 9%, and 54.2% of the total deals in the region, respectively.
Amid the increasingly challenging economic climate, most M&A transactions in the Middle East were focused on recession-proof sectors, such as non-discretionary consumer goods and healthcare, while technology, media, and entertainment remained popular. Additionally, infrastructure deals proved to be a highlight in the region’s M&A activity.
Looking ahead to 2023, we anticipate a new dealmaking environment characterized by the same challenges that affected the market in the latter part of 2022. As a result, we expect the M&A sector to remain sluggish, particularly in the first half of the year. Despite this, the performance outlook, potential public-to-private opportunities, distressed situations, and lower valuations could present new avenues for dealmaking and unlock previously pent-up deals.
Nevertheless, in this increasingly complex environment, the timelines for completing deals are likely to be longer, and the risk of executing transactions successfully is higher.
Corporate Solutions 
IMC Group