M&A activities in Saudi Arabia to speed up despite global slowdown: PwC report

Saudi Arabia has become one of the most attractive markets for international companies seeking new M&A.

RIYADH: (RAHNUMA) Mergers and acquisition activities in Saudi Arabia are expected to accelerate in 2023, even as the world is witnessing a slowdown in M&A deals, according to a new report.

The report released by professional services network firm PwC Middle East noted that Saudi Arabia has become one of the most attractive markets for international companies seeking new M&A.

According to the report, Saudi Arabia’s Vision 2030 aimed at diversifying the country’s economy has also played a key role in turning the Kingdom into a hub for international investors.

“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,” said Imad Matar, deals partner at PwC Middle East in Saudi Arabia.

He added: “At the same time, the Public Investment Fund will continue to spearhead outbound cross-border transactions, as well as fueling domestic deals. Middle East CEOs are actively preparing for a more dynamic period ahead, marked by transformation to strengthen their longer-term resilience.”

The report said that Saudi Arabia’s national vision, industrial strategies, and various tourism initiatives will help sustain economic growth beyond Vision 2030 and support future M&A opportunities.

According to the report, the Middle East region as a whole is also witnessing a spur in M&A activities, as it maintained an upward trajectory in 2022 amid a global slowdown.

The report said that the majority of Middle East M&A activities were concentrated in Saudi Arabia, the UAE, and Egypt, which collectively recorded 563 deals or 89 percent of the region’s total volume.

The report also talked about the initial public offerings in Saudi Arabia which witnessed 17 primary listings in 2022, including the $1.3 billion IPO of Saudi Aramco Base Oil Co.

Earlier in March, global rating agency Moody’s said that banks in the Gulf Cooperation Council region will witness a rise in M&A activity enabling future synergies and oil revenue divergences in the region.

‘‘Consolidation among GCC region banks brings scale to support the diversification of Gulf economies away from oil, and benefits in revenue and cost synergies,” said Francesca Paolino, an analyst at Moody’s.

The rating agency noted that this development will occur despite the region’s pre-existing strong bank financial fundamentals and their modest level of over-banking.

In an interview with Arab News, Gregory Garnier, regional head of private equity and sovereign wealth fund practices at Bain & Co. said that sovereign wealth funds in the Middle East are the driving forces behind M&A in the region, which witnessed the activity rise to about 39 percent in 2022.

The top official of the American management consulting firm also attributed the rise in M&A deals in the region to “high economic growth” providing “financial headroom to invest.”

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