Increased interest and a stronger desire for investment opportunities on the ground will propel dealmaking activity into an unprecedented era of growth and potential in various investment sectors within the region, a new report suggested.
The 2024 TransAct report released by PwC Middle East highlighted the promising nature of the Middle East’s deal market despite global economic challenges experienced in 2023.
Read more: Global M&A market falls to $3.2 trillion in 2023
The report, titled “Strategic growth beyond oil: Economic diversification and decarbonisation expected to boost deal making in the region,” showed that despite the slower growth rate of the global economy, the Middle East has demonstrated resilience due to solid economic fundamentals and supportive government policies. This resilience has instilled confidence in investors and led to an active deal market in the region, in contrast to other regions that have been more susceptible to recessionary fears and higher interest rates.
Strong economic fundamentals
The report noted that the market’s buoyancy is attributed to the region’s strong economic fundamentals and supportive policies, with member nations actively undergoing digital transformation, strengthening their non-oil sectors, and driving energy transition initiatives. To gain a competitive advantage, businesses are advised to leverage transactions such as mergers and acquisitions, divestments, joint ventures, or refinancing to expedite their progress, acquire new capabilities, or enhance their market position.
Although there has been a decline compared to 2022, it is anticipated that the deal market will remain active and experience growth in various sectors throughout 2024, as governments continue to pursue strategic agendas and diversify their economies.
Romil Radia, Regional Deals Clients & Markets leader at PwC Middle East, commented that the Middle East’s M&A market has shown remarkable resilience, leading to increased investor confidence and heightened dealmaking activity. Radia expected 2024 to be a year of growth, driven by economic diversification goals, decarbonisation efforts, as well as a focus on localization and value creation as organizations transform their business models and aim to expand their capabilities.
Resilient dealmaking in Saudi Arabia
Imad Matar, Transaction Services leader at PwC Middle East, also noted that dealmaking has remained resilient in Saudi Arabia due to the country’s focus on national development. Matar anticipated increased activity in non-oil private sectors, particularly in infrastructure, industrial manufacturing, and clean technology industries.
Matar further said, “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.”
Emergence of funding opportunities
Furthermore, the paper discussed the emergence of funding opportunities for critical infrastructure and technology development, including hydrogen, wind, solar, and carbon capture, driven by net-zero targets and energy transition considerations. There is also a growing willingness among companies to invest in clean energy. The technology sector is identified as another area with significant potential for dealmaking growth in 2024, particularly in cybersecurity, cloud computing, and e-commerce. The Middle East’s active embrace of the digital revolution, with countries like Saudi Arabia, UAE, Qatar, and Bahrain outlining economic visions that prioritize advanced technologies, including artificial intelligence, further accelerates this trend.
Talent prioritization, proactive skills development
PwC Middle East experts advised that attracting and retaining talent should be a priority, emphasizing proactive skills development and education to prepare the workforce for the evolving business landscape. To remain competitive, businesses and wealth funds must maintain agility and adaptability, leveraging dealmaking as a strategy to navigate market developments, with a specific focus on technology, innovation, infrastructure, and renewable energy sectors.
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