Saudi Arabia leads unprecedented M&A opportunities across Middle East region after IPO growth

• A total of 632 M&A deals had been recorded in the Middle East in 2022
• Technology, energy, food processing, healthcare and education sectors were the top IPO deals drivers in the region
• Saudi IPO market witnessed17 primary listings in 2022
• 89% of the region’s total deal volume was collectively recorded in the Kingdom of Saudi Arabia, UAE and Egypt

PwC Middle East released its 2023 TransAct Middle East report titled, “Gulf exceptionalism creates M&A opportunities despite global headwinds,'' which offers insights on the Merger & Acquisition (M&A) and Capital market activity across the Middle East region during 2022 and the trends being seen that will potentially impact M&A activity going forward. 

According to the report, M&A activity in the MENA region has shown a remarkable exception to the general pattern of the slowdown in global M&A deal activity. It has successfully maintained an impressive upward trajectory in 2022, with a series of substantial $1bn-plus transactions taking place across different industries. Moreover, the majority of Middle East M&A activity in 2022 was concentrated in the UAE, Saudi Arabia and Egypt, which collectively recorded 563 deals, or 89% of the region’s total deal volume. Saudi Arabia has become one of the most attractive markets for international companies seeking new mergers and acquisitions, and maintained its position in 2022. This is attributed to the rising global demand for crude oil, the ambitious Vision 2030 targets and the government's increased focus on improving the private sector. 

As  reflected by the Middle East findings for PwC’s 26th Global CEO Survey, 2023 is expected to be a progressive time for transformation and transactions at the forefront of CEOs’ value creation strategies. Saudi Arabia is set to drive change and M&A activity, as the Kingdom’s sovereign wealth fund accelerates investments in alignment with Vision 2030. 

Listing activity gained traction as Saudi Arabia pursued their strategic agenda of increasing capital market activity and attracting foreign investment. In addition Saudi Arabia’s thriving IPO market witnessed a particularly strong surge in listings in 2022, with 17 primary listings. IPO deals in the region were driven by the technology, energy, food processing, healthcare and education sectors. They included Saudi Aramco Base Oil Co.’s $1.3bn IPO. Other significant advances stem from the Kingdoms expansion within technology, which acts as an enabler to other sectors, such as healthtech, edutech, ESG investment and fintech. As an example of this, the report showed that Saudi Arabia’s Tamara raised $100 million in a Series B funding round led by Sanabil Investments.The combined driving initiatives place Saudi at the forefront of the region's M&A acceleration and global economic growth. The report explores how UAE and Saudi Arabia witnessed the fastest year-on-year increase in deals, with volumes rising respectively by 9% and 6%. 

Fundraising continued to drive capital flows in 2022, with the region remaining an attractive target for venture capital (VC) funds. Some of the major emerging M&A themes of 2022 include: 

• Deep resources available to support M&A investments

• Higher interest rate environment should stimulate increased focus on value creation

• Strong focus on technology and infrastructure

• Cross-border M&A continues, building up national and regional champions

• The energy transition is creating new M&A opportunities

Imad Matar, Deals Partner at PwC Middle East in Saudi Arabia commented, “Saudi Arabia is expecting a further pick up in M&A activity during 2023, despite a strong pipeline of IPOs, as the gap in valuation multiples between these two exit routes narrows for investors looking to sell assets. At the same time, the sovereign Public Investment Fund will continue to spearhead outbound cross-border transactions, as well as fuelling domestic deals. Middle East CEO’s are actively preparing for a more dynamic period ahead, marked by transformation to strengthen their longer-term resilience.”

The report also shows that the current market conditions in early 2023 suggest that the Middle East is a rare global sweet spot for M&A, as long as companies have cohesive strategies and the right financial resources to make transformational deals. Saudi Arabia’s national visions, industrial strategies, sustainable destinations and various tourism initiatives across the Kingdom will sustain economic growth beyond Vision 2030 and support future M&A opportunities. 

The trends highlighted in PwC’s TransAct Middle East report – deep resources to support M&A investments, increased focus on value creation, increased demand for technology and infrastructure deals, cross-border M&A continues build up, and the energy transition which is creating new M&A opportunities – reference a positive outlook within Middle East M&A deals, provided that entities make bold moves while performing calculated decisions.