M&A activity rebounds with USD 3.5 tn in transactions in 2024, ending two-year decline -Bain

Muted growth for M&A activity this year: M&As are expected to end the year with a 15% y-o-y growth to USD 3.5 tn, marking a 7% y-o-y increase in volume, and reversing a two-year decline, Bain & Company says in its latest report. Still, activity fell short of earlier hopes for a robust recovery, especially with regards to a detente on valuations and regulatory concerns — prompting dealmakers to become more selective and look for cost synergies amid a higher interest rate environment. Strategic M&A valuations also remained at a historical low, well below public market valuations, which spiked this year.

The Middle East played a big role in M&A transactions throughout the year, with inbound and domestic M&A activity growing 88% y-o-y, totaling USD 36 bn in the first ten months of 2024, according to a press release (pdf) from Bain. This growth has been primarily driven by sovereign wealth funds and government-related entities in Saudi Arabia and the UAE. Middle Eastern acquisitions of European targets also doubled in 2024, with a bigger focus on cost synergies.

The breakdown: Globally, private equity transaction value grew by 29% y-o-y, while venture capital showed a similar 30% increase, and corporate M&A is on track to grow 12% y-o-y.

Energy, natural resources and technology were the biggest M&A sectors for the region: The energy and natural resources sector saw transactions grow 140% y-o-y, while activity in the technology sector grew 90% y-o-y, and advanced manufacturing services saw an increase of around 300% y-o-y.

M&As took longer to close due to increased regulatory scrutiny, which extended acquisition timelines in 2024, with nearly 47% of dealmakers saying that regulatory concerns influenced their acquisition considerations. The Middle East became a good region for M&A activity due to its comparably favorable regulatory environment, Bain said.

Smaller M&A transactions accounted for the lion’s share of activity: Transactions valued at less than USD 1 bn accounted for 95% of all activity, with volume growing for the first time in four years.

Scale deals — where companies target a bigger market share through an acquisition — accounted for 59% of total global transaction value, marking the highest proportion since 2015. This trend was also prominent in the Middle East as firms sought to consolidate their leading positions in key sectors.

MARKETS THIS MORNING-

Asian markets are mixed yet again as traders await interest rate decisions from Japan and China. Japan’s Nikkei is down 0.4%, while the broad-based Topix is up marginally. Meanwhile, South Korea’s Kospi is up 0.6%. Over on Wall Street, futures are up marginally after another losing session for the Dow Jones, Nasdaq, and S&P 500.

THE CLOSING BELL-

The ADX fell 0.2% yesterday on turnover of AED 1.1 bn. The index is down 3.3% YTD.

In the green: Union Insurance Company (+10.2%), Abu Dhabi National Co. for Building Materials (+10.0%) and Al Khaleej Investments (+6.6%).

In the red: Mair Group (-5.3%), Julphar (-4.8%) and Pure Health Holding (-3.5%).

Over on the DFM, the index closed up 0.6% on turnover of AED 2.1 bn. Meanwhile Nasdaq Dubai, the index rose 1.8%.