PwC Report: Diversification Fuels 2024 M&A Boom in Middle East 

The winds of change are blowing across the business landscape of the Middle East. With a focus on economic diversification and a growing embrace of clean energy and technology, the region is poised for a potential surge in mergers and acquisitions (M&A) activity in 2024. This shift signals a promising future for the Middle East, moving beyond its traditional dependence on oil. 

The new report by PwC Middle East predicts a surge in mergers and acquisitions (M&A) activity across the region in 2024. This positive outlook is fuelled by strong economic fundamentals and government efforts to diversify away from a reliance on oil. 

The report, titled “Strategic growth beyond oil: Economic diversification and decarbonisation expected to boost deal making in the region,” highlights several key factors contributing to this optimistic forecast. Despite global economic headwinds, Middle Eastern economies have demonstrated resilience, which has in turn attracted investor confidence. This stability is coupled with a strong push by governments to promote non-oil sectors, creating a wealth of new investment opportunities in areas like technology, infrastructure, and renewable energy. The report also emphasizes the growing importance of dealmaking for businesses to stay competitive in this evolving landscape. 

Romil Radia, Regional Deals Clients & Markets Leader at PwC Middle East, commented: “The Middle East’s M&A market has shown remarkable resilience, which has boosted investor confidence in the region and led to an increase in active dealmaking. We anticipate that 2024 will be a year of growth and activity will be driven by economic diversification goals, decarbonisation, and a focus on localisation and value creation, as organisations transform their business models and look to expand capabilities.” 

Also commenting on the report findings, Imad Matar, Transaction Services Leader at PwC Middle East, said: “Deal making has remained resilient in Saudi Arabia, given its keen focus on the national development agenda. We see an expansion of activity in the non-oil private sectors, particularly infrastructure, industrial manufacturing, and clean technology industries. In 2023, Saudi Arabia saw less substantial declines in deal volume. IPO activity has also remained strong and we are confident that the region will continue to see a strong pipeline coming through in 2024.”  

He also added: “We expect the positive momentum to continue as the government privatises state assets and encourages private sector companies to list in a bid to attract investment, push reforms and move away from dependency on fossil fuels.” 

According to the PwC report, economic diversification and the transition to clean energy are acting as major drivers of M&A activity. With countries setting ambitious net-zero targets, there is a surge in investments aimed at developing critical infrastructure and clean technologies, spanning areas from hydrogen production to wind, solar power, and carbon capture solutions. This trend is further amplified by a growing willingness among companies to invest in clean energy sources. 

The technology sector is another area with significant potential for dealmaking growth in 2024. Areas like cybersecurity, cloud computing, and e-commerce are particularly well-positioned to attract investments. The Middle East’s enthusiastic adoption of digital technologies is further accelerating this trend. Countries like Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Bahrain are all outlining economic visions that heavily involve the adoption of advanced technologies, including artificial intelligence (AI). 

PwC Middle East experts warn that attracting and retaining talent should also be a top priority for businesses. The report emphasizes the need for proactive skills development and education initiatives to prepare the workforce for the evolving business landscape. Businesses and sovereign wealth funds must prioritize agility and adaptability to stay competitive. Dealmaking can be a strategic tool to help them navigate market developments, with a particular focus on the technology, innovation, infrastructure, and renewable energy sectors. 

The report also dives into country-specific highlights. While there was a decline in deal volume compared to the record-breaking year of 2022, the UAE and Saudi Arabia witnessed smaller dips of 14.5% and 13.2% respectively. Egypt, on the other hand, experienced a sharper decrease of 60.4%. This can be attributed to currency devaluation, high inflation, and broader macroeconomic challenges faced by the country in 2023. However, the devaluation of the Egyptian pound has shifted deal dynamics in favour of buyers, making the country attractive to investors in sectors like energy, healthcare, financial services, and tourism. 

The technology, energy, industrial, and financial services sectors were the most active in the UAE in 2023. This can be attributed to the country’s business-friendly regulations and streamlined legal framework. The UAE’s sovereign wealth funds also remain active investors in both domestic and international forward-looking sectors. 

A similar trend was observed in Saudi Arabia, where the government’s commitment to achieving its Vision 2030 goals, aimed at diversifying the economy away from oil, has resulted in expanded activity in non-oil private sectors, particularly across infrastructure, industrial manufacturing, and clean technology industries. The enactment of the New Companies Law in January 2023 and the Civil Transactions Law in December 2023 are set to further solidify Saudi Arabia’s position as an attractive investment destination. These laws were designed to align with Vision 2030 goals and provide greater legal certainty for businesses operating in the Kingdom. 

Capital markets and initial public offerings (IPOs) also painted a positive picture for the region. Despite a global decline in capital market activities since 2022, the Middle East has continued to perform well. This momentum is fuelled by continuous efforts to attract foreign investments to key economies like Saudi Arabia and the UAE. These efforts are bolstered by active pipelines in both the public and private sectors, alongside a growing recognition by investors of the region’s promising prospects. The region saw a total of 47 IPOs, generating a combined US$10.7 billion. The energy and utilities sector led the way, with a mega IPO in H1-2023 by UAE’s ADNOC Gas, which raised US$2.5 billion, and an IPO by Ades Holding Co., which raised US$1.2 billion in proceeds. 

The report also details some of the biggest M&A transactions that took place in the Middle East in 2023. Here are the top five: 

• Saudi Arabia’s PIF acquired a minority stake in four local construction companies: Nesma & Partners Contracting Co, Almabani General Contractors Co, El Seif Engineering Contracting Co and Al Bawani Holding Co for a total of US$1.3 billion in February 2023. 
• A consortium led by Saudi Arabia’s PIF acquired an 80% stake in Zain KSA, the second-largest telecommunications company in the Kingdom, for US$806.8 million in January 2023. 
• UAE-based Global Investments Holding Ltd acquired a 30% stake in Eastern Company, the largest tobacco producer in Egypt, for US$625 million in September 2023. 
• Emirates Telecommunications Group Company PJSC acquired a 50.03% stake in the super-app business of Careem Networks FZ LLC for US$400 million in April 2023. 
• Top Saudi asset manager, SNB Capital, acquired a 20% stake in Tamara, a leading buy-now-pay-later business, co-leading the series C investment round with Sanabil Investments, for US$340 million in December 2023. 

PwC’s report concludes with a positive outlook for dealmaking in the Middle East throughout 2024. As governments press forward with their economic diversification plans and the global M&A environment improves, the report anticipates a surge in deals and valuations across the region. To stay ahead of the curve, the report advises businesses to focus on reinventing their business models to leverage new technologies like AI, prioritize talent acquisition with a focus on future-proof skillsets, and maintain agility to adapt to the rapidly evolving market landscape. By embracing these key takeaways, businesses in the Middle East can position themselves to capitalize on the wealth of opportunities that lie ahead in 2024 and beyond.