Global deal-making will experience a continued hangover in 2020 thanks to ongoing worldwide economic uncertainty and the risk of global recession, according to the new report by Baker McKenzie. The report also reveals that the deal flows in North America and the Middle East are outliers to the global trend.

The firm’s fifth annual Global Transactions Forecast, produced in conjunction with Oxford Economics, projects that merger and acquisition (M&A) value will decline globally from $2.8 trillion in 2019 to $2.1 trillion in 2020. The report predicts a downward trend in IPO proceeds from an estimated $152 billion in 2019 to $116 billion, a 23% drop.

“Make no mistake — deals are getting done, but the current slowdown is inevitable considering the continuing uncertainty around trade and regulation,” said Ai Ai Wong, Chair of Baker McKenzie’s Global Transactional Group. “We know that around the world, there are many investors and companies with capital on the sidelines, waiting to move forward with domestic and cross-border deals.”

Middle East

Deal-making remain robust in the Middle East, underpinned by strong domestic activity. Some of the large transactions in 2019 include Saudi British Bank’s $5 billion merger with Alawwal bank and Abu Dhabi National Oil Company’s $4 billion sale of a 40% stake in its pipeline unit to US private equity investors KKR and BlackRock. The Middle East anticipates to close $45 billion in M&A deals in 2019, subsequently falling in line with global trends in 2020. Although Saudi Aramco’s $69 billion purchase of a 70% stake in Saudi Basic Industries Corporation should boost M&A proceeds in 2020. The region also expects a rise in IPO proceeds from $2 billion in 2019 to over $40 billion in 2020, with the potential floatation of 2% of the shares of Saudi Aramco.

“The M&A markets particularly in Saudi Arabia and the UAE have remained buoyant this year, with transaction values boosted by mega deals such as the ground-breaking merger of Saudi British Bank and Alawwal bank, and by cross-border inflows into the UAE, facilitated by recent foreign investment reforms,” said Omar Momany, UAE Head of Corporate/M&A at Baker McKenzie Habib Al Mulla. “Although we expect deal values to return to normal levels in the coming years, the Middle East is likely to remain an attractive target region for both domestic and foreign investors.”

Karim Nassar of the Corporate/Equity Capital Markets Group of Legal Advisors in Riyadh added: “While we have seen relatively subdued IPO activity globally and in other Gulf countries, the pipeline activity for listings out of Saudi Arabia continues to develop rapidly. With Riyadh’s inclusion on the MSCI emerging market index and the anticipated listing of Saudi Aramco that could raise up to $40 billion, this will definitely provide an enormous boost to global IPO proceeds in 2020 and beyond.”

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To speak to us in relation to any market activity and transactional trends in the Middle East, please feel free to contact one of the lawyers below.

Author

Omar Momany is the Head of the UAE Corporate/M&A practice of Baker McKenzie Habib Al Mulla, based in Dubai. With over 15 years' experience in the Middle East, Omar focuses on public and private mergers and acquisitions, corporate restructurings, corporate governance, joint ventures, commercial matters and corporate/shareholders' disputes in the UAE and throughout the region.

Author

Karim Nassar is the Head of the Equity Capital Markets practice of Legal Advisors, in association with Baker & McKenzie Limited, based in Riyadh. A resident in Saudi Arabia since 1998, Karim has been advising Saudi and foreign clients on a wide range of corporate transactions, including privatizations, corporate, securities, corporate finance, mergers and acquisitions, as well as financial services regulations. He also helped to develop and finalize the regulatory framework for the Capital Market Authority in Saudi Arabia.

Author

Mohammad Al Rasheed is a partner in our UAE/Saudi Arabian Corporate & Securities practice, specialising in mergers and acquisitions, initial public offerings and private placements. Mohammad has worked on transactions in the Kingdom of Saudi Arabia for more than 10 years, and has developed an in-depth knowledge of the Saudi Arabian market. Although based in the UAE, his practice is split between the Kingdom of Saudi Arabia and the UAE.

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