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Wednesday, 29 December 2021

A solid year for M&A

It wasn’t “The Year of M&A,” but there was plenty of action and drama. After two years of y-o-y growth in the number of M&As announced and concluded, 2021 saw a drop in numbers and values of tie-ups compared to the 2020 and 2019.

A total of 76 tie-ups with Egypt involvement were announced this year, including domestic, inbound and outbound transactions. All numbers in this story are based on our internal Enterprise M&A Tracker, which we maintain throughout the year.

Some 38 transactions closed this year, eight of them tie-ups that had been announced in 2020 and the rest agreements that were announced and closed this year. The completion rate on this year’s planned transactions stands at around 40%, down from 56% in 2020 — and way down from 2019’s c.80% completion rate.

Six M&As were scrapped altogether, out of the 76 tie-ups that were announced throughout the whole year. By our count, there are some 46 transactions that are either still in the works, are pending regulatory approval, or appear to have stalled somewhere along the way.

The Transaction of the Year? It’s a tie-up between Emirati real estate giant Aldar Properties and Abu Dhabi sovereign wealth fund ADQ’s snap-up of 85.5% of SODIC, and EFG Hermes and the Sovereign Fund of Egypt finally closing their acquisition of a combined 76% stake in the Arab Investment Bank.

EFG Hermes officially became a universal bank with its acquisition of the Arab Investment Bank, with its Egyptian operations now including an investment bank, a commercial bank and a fast-growing non-bank financial services platform. And while the transaction is huge for EFG as an institution, it’s also big news for Egypt’s banking sector, as it marked the first privatization in the sector since the 2006 sale of an 80% stake in Bank of Alexandria to Intesa Sanpaolo.

SODIC’s sale to the Aldar / ADQ consortium was the largest-ever M&A and case of foreing direct investment in Egypt’s real estate market, bringing in EGP 6.1 bn in an all-cash transaction. Notably, the acquisition acts as Aldar’s entry point into our real estate market, with the Emirati giant signaling that it’s assessing several other possible ventures in Egypt.

The reworked transaction of the year: Vodafone Group’s sale of Vodafone Egypt. After the London-based mother company’s planned USD 2.4 bn sale of Vodafone Egypt to Saudi Telecom went bust at the tail-end of 2020, Vodafone PLC transferred its 55% stake in Vodafone Egypt to its South Africa unit, Vodacom, in a EUR 2.72 bn transaction last month.

The big bust of 2021: The mega-merger between Cleopatra Hospitals Group and Alameda Healthcare, which had appeared to be in the clear at the end of 2020, but the agreement was terminated in May of this year. Neither side would speak on why the tie-up fell through, saying only that it wasn’t a regulatory issue. The Egyptian Competition Authority had previously warned it wasn’t particularly inclined to approve the merger, but insiders at both companies tell us that ultimately had nothing to do with the tie-up falling through.

NEW TREND of the year: Startups are now acquiring other early-stage companies, as we noted in our What’s Next vertical. The trend holds up both here and abroad: Some 268 venture-backed US companies acquired peers in the first seven months of this year, while local startups are increasingly moving towards consolidation thanks to record levels of financing, overcrowding in some sectors, and newfound IPO prospects.

For a handful of potential M&A, the competition was hotter than an early-August day: Chief among those is the protracted bidding war over Alex Medical, which saw not one, not two, not three, but eight companies and consortiums signaling their interest in acquiring a stake in the healthcare provider. One by one, a handful of Alex Medical’s suitors began pulling (or threatening to pull) their offers to acquire up to 100% of the company. Time of death hasn’t been called on the transaction just yet, with Cleopatra Hospitals Group, the UAE’s Global One Healthcare, Nile Misr, Seha Capital, and the Tawasol Holdings-LimeVest consortium still reportedly in the battle.

The vast majority of M&A was either between local players or inbound acquisitions. 16 announced transactions were inbound, while 10 transactions were outbound. The remaining transactions were all domestic.

By number of transactions, healthcare and banking / financial services were still the prime drivers of announced M&A activity in the year now ending. Taking a wide view of industry classifications:

Top industries for M&A in 2021, by volume: Healthcare is at the top of the game, closing the year with 13 M&As, with Integrated Diagnostics Holdings’ planned acquisition of 50% of Islamabad Diagnostic Center putting it one spot ahead of banking / financial services, which had 12 M&As announced this year. The runners-up: energy (6), transport and logistics (6), and fintech (4).

That’s a shift from 2020, when the number of banking and financial services M&As was almost double those in the healthcare industry. But still, they retain the top two positions.

Top industries for M&A in 2021, by value (EGP): Energy / oil and gas (EGP 12.2 bn), followed by real estate (EGP 6.3 bn) healthcare (5.48 bn) and banking / financial services EGP (3.98 bn).

Top financial advisors in 2021, by volume: CI Capital and EFG Hermes — both of which had solid showings in 2021 — were neck-and-neck this year for the title of top financial advisors. EFG was tapped to quarterback five M&As announced this year, while CI Capital ran four. Notably, the two investment banks were financial advisors on the Aldar / ADQ takeover of SODIC, with CI Capital advising the Emirati consortium and EFG advising the sell-side. EFG is also advising the selling shareholder in IDH’s acquisition of IDC. Arqaam Capital follows, with two of 2021’s M&As in its pipeline.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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