M&A activity is off-track globally this year

Global M&A activity has yet to show “a sustained recovery” despite a surge in transaction volumes at the start of the year, according to data compiled by Bloomberg. “The year has been good so far, but all indications suggest it should have been great,” Guggenheim Securities Global Head of M&A Eric Rutkoske told the business information service, adding that “there has been a deceleration” in activity despite “macro indicators actually [getting] better throughout the year.”

Increased M&A activity came on the back of expectations that central banks would slash interest rates, but faltered after the Federal Reserve projected a single rate cut this year. “It’s really wait-and-see mode until we understand what direction of travel we’re in and what that means for the broader economy. That’s what’s keeping some folks on the sidelines,” JPMorgan Chase & Co Co-Head of North America M&A Ben Carpenter said.

Global M&A transactions stood at USD 1.4 tn in 1H 2024, up 14% y-o-y, but still over USD 300 bn below the 10-year average for the first half of the year. The energy sector stood center in most M&A activity in 2024, with transaction values in the sector up by over 40% during the year. Technology companies were also “heavily targeted by both strategic and private equity buyers,” while dealmaking in healthcare came to a standstill in favor of smaller private transactions.

Higher borrowing costs and rising stock markets are to thank for halted negotiations: “Buyer and seller valuation mismatches have narrowed but they haven’t been completely bridged, and while capital is increasingly available, it’s still very expensive,” said Evercore Inc Senior Managing Director and Co-Head of US Investment Banking Naveen Nataraj.

It’s unlikely that activity will pick up again before November, with bankers and lawyers predicting that some companies will wait for the results of the US election in November before deciding whether or not to pursue transactions. “There’s a view that the regulatory policy could change meaningfully so there are a lot of larger transactions that companies may wish to start under a new administration,” said Rutkoske.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.6% on Thursday on turnover of SAR 6.6 bn. The index is down 2.0% YTD.

In the green: Talco (+10.0%), Rasan (+8.7%) and Saudi Ceramics (+6.5%).

In the red: Al Baha (-7.7%), Al Khaleej (-4.0%) and Anaam Holding (-3%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.2% on Thursday on turnover of SAR 38.7 mn. The index is up 7.2% YTD.

In the green: Al Rasheed (+8.8%), Armah (+8.8%) and Mayar (+6.9%).

In the red: Knowledge (-8.3%), Saudi Top (-7.6%) and Burgerizzr (-6.5%)

CORPORATE ACTIONS-

#1- Shareholders of Tadawul-listed Saudi Ceramic have approved the board’s recommendation to increase its capital by 25% to SAR 1 bn, according to a disclosure to Tadawul. Saudi Ceramic will finance the increase by capitalizing SAR 200 mn in retained earnings and granting one share for every owned share by shareholders. The capital increase comes under the ceramic manufacturer’s expansion plans.

#2- Shareholders of Al Sagr Cooperative Ins. have approved the board’s recommendation to more than double its capital to SAR 300 mn through a rights issuance, according to a regulatory filing (pdf). The capital increase aims to support the company’s future plans, enhance the company’s solvency margin, and meet the minimum capital requirements for ins. Companies.

#3- Shareholders of Tadawul-listed Tabuk Cement have approved the board’s recommendation to distribute SAR 22.5 mn in dividend at SAR 0.25 per share for FY 2023, according to a regulatory filing (pdf). The distribution date will be announced at a later date.

#4- Shareholders of Nomu-listed International Human Resources have approved the board’s recommendation for a SAR 1.2 mn dividend distribution at SAR 0.025 per share for FY 2023, according to a regulatory filing (pdf). The distribution date is set for Sunday, 21 July.