M&A could have its day in the Gulf again
After two years in doldrums, M&A activity in the Middle East is tipped to grow again in 2010. There are already signs that investment banks are staffing up in this areas, but a combination of Western expertise, local experience and Arabic language skills is the order of the day.
There's a decidedly bullish air around Gulf M&A activity this year. In the first quarter of 2010, M&A deals amounted to $3.6bn, according to figures from mergermarket.
And the vast majority both international and regional investment banks are anticipating M&A value to reach $25bn in 2010, with further growth expected in 2011, according to a study by business information service Zawya.com.
Predictably, Saudi is likely to lead this activity, followed Qatar and the UAE. Telecommunications and financials are tipped to be the most active sectors.
Reassuringly for investment bankers with expertise in this area, the research says that firms are already looking to hire specialists to meet the expected demand.
James Bridgman, managing director of Kinsey Allen's Middle East operations, says: "Some of the banks in the region have reduced their M&A teams in line with reduced business activity over the last two years. However, there is now hiring across the Gulf region - not just in Saudi - but this is selective and at the senior end, rather than recruiting teams of people as would have been the case in previous years."
This cautionary approach may be down to the ongoing risks that could hamper M&A, such as a lack of liquidity, a disconnect between companies' growth expectations and those of the market, and a resistance from corporates' senior management, suggests the survey.
"M&A transactions in the Middle East are particularly challenging as it is not the only economic aspect but also the political dimensions that need to be taken into account," Waleed El Mir, managing director, head of Middle East and Turkey Investment Banking and Capital Markets at Bank of America Merrill Lynch, told Zawya Dow Jones.
There's also the fact that investment banks are becoming more demanding when it comes to recruiting M&A professionals, suggests Tel Rashid, regional manager, Middle East & Africa at headhunters Spengler Fox.
"After the influx of 2008, regional investment banking experience combined with Western expertise is fairly common," he says. "The ideal candidate has to also be an Arabic speaker and well-connected locally. Firms are also attempting to persuade UAE nationals currently working in Western locations back to the Middle East."
