M&A activity in the Gulf region has been a notable exception to the general trend of a slowdown in worldwide M&A deal activity.

PwC Middle East published its 2023 TransAct Middle East report, titled “Gulf exceptionalism creates M&A opportunities despite global headwinds,” which provides insights on Merger & Acquisition (M&A) and Capital market activity across the Middle East region in 2022, as well as trends that may impact M&A activity in the future.

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According to the report, M&A activity in the region has been noticeable in contrast to the general trend of a drop in global M&A deal activity.

It has effectively maintained an amazing upward trajectory in 2022, with a succession of $1bn plus transactions across various industries.

This is attributable to “Gulf exceptionalism,” which results from favourable regional dynamics including rising oil prices and improved fiscal restraint, which helped the region experience better economic flexibility and relatively faster growth.

In addition, the UAE, Saudi Arabia, and Egypt accounted for 563 transactions, or 89 percent of the total deal volume in the Middle East in 2022, and were the main centres of M&A activity in those countries.

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Deal volumes increased by 9 percent and 6 percent, respectively, in the UAE and Saudi Arabia, which saw the fastest year-over-year growth in deals. The UAE’s efforts to diversify away from oil and gas were supported by deal activity that was mostly focused on consumer markets, technology, industrials, and financial services.

Capital flows were still mostly driven by fundraising in 2022, and the region remained a popular investment for VC funds.

Many significant new M&A themes for 2022 include:

  • There are extensive resources available to support M&A investments.
  • A higher interest rate environment should encourage a greater emphasis on value development.
  • A strong emphasis is placed on technology and infrastructure.
  • Cross-border M&A continues, with national and regional champions emerging.
  • The energy transformation is giving rise to new M&A opportunities.

“The Middle East is certainly not immune to the economic headwinds affecting M&A elsewhere, but at the start of 2023, the mood here is more optimistic than most global markets and some momentum from last year has continued into 2023,’’ said Romil Radia, Regional Deals Markets Leader at PwC Middle East.

‘’In its favour, the region has deep financial resources available for deals, which is supporting outbound and cross-border transactions. There is also enormous potential around the energy transition, and a strong focus on tech and digital acquisitions as transformation programmes continue regionally.”

The analysis shows, existing market dynamics in early 2023 reveal that the Middle East is a unique global sweet spot for M&A, as long as companies have unified plans and the necessary financial resources to implement transformational mergers.