M&A WATCH- The total value of M&A in the Middle East plummeted 90% y-o-y in 1Q2020 to USD 9.28 bn from 95 transactions, down from USD 88.27 bn from 109 transactions during the same quarter last year, according to a report from Baker Mckenzie (pdf). On a quarterly basis, total M&A value rose from USD 4 bn in 4Q2019. Around 63% of all Middle East M&A activity was cross-border in 1Q2020, while domestic transaction values dropped 94% y-o-y.

Egypt was the top target market for inbound M&A at USD 2.4 bn, but the figure masks the fact that it was on the basis of a single transaction: The still-in-the-works acquisition by STC of Vodafone Group’s shareholding in Vodafone Egypt.

The total value of M&A activity in the region fell faster than the global average, which dropped 70.5% y-o-y to USD 4.29 bn during the quarter. Transaction volume globally rose 9.4% y-o-y.

Outlook is mixed, but could see growth at a slower rate: The outlook for the remainder of the year is unclear due to the high level of uncertainty from the covid-19 pandemic, said Omar Momany (pdf), who runs M&A at Baker McKenzie Habib Al Mulla in the UAE. One of the two scenarios Momany sees moving forward is M&A volumes and values slowing down even further, potentially through the end of 2020, “reflecting on the global uncertainty, investors’ anxiety and shift of priorities.” A more optimistic scenario would see growth in M&A activity “but at a much slower pace and value … driven by companies being interested to join forces in an attempt to mitigate losses and consolidate.”

India led outbound cross-regional transactions, while the UAE continued to drive inbound M&A in the region, the report said. “The UAE remained the most attractive foreign investment destination both by volume and value with 16 [transactions] amounting to USD 1.1 bn.” The value of cross-regional transactions targeting the Middle East dropped 91.4% y-o-y to USD 1.19 bn, but soared 1,078% in comparison to 4Q2019. By value, outbound cross-regional transactions rose 41.5% y-o-y to USD 3.64 bn, with volumes up 12.5%.

Industrials and tech were the most attractive acquisition target sectors for inbound and regional investment by value and volume, respectively, in 1Q2020. High technology accounted for seven transactions worth USD 190 mn, while industrials saw four transactions amounting to USD 1 bn.