Following a robust year in cross-border M&A in 2014, the Middle East and North Africa (MENA) region is well-positioned to contribute to further growth. The value of M&A activity involving Middle Eastern players reached $50.3 billion in Q4 2014, a record high for the region in the past five years, and an increase of almost 20% from the previous year.

The big three

Three nations in particular – Saudi Arabia, Egypt, and the United Arab Emirates (UAE) – are expected to lead deal flows in the region this year, owing in part to their relative wealth and their expanding share of the deal pool. A remarkable recovery by the UAE from its near sovereign default circa 2009 is evident in the country’s financial performance in recent years, specifically in the infrastructure and real estate sectors, as well as in financial services M&A activity. Saudi Arabia is close behind, with Egypt on its tail.

Liquid markets

The UAE, together with Saudi Arabia, which has already seen more than a handful of deals this year, accounted for almost a quarter of the region’s outbound activity in 2014. Egypt, with a population of over 90 million, boasts a strong consumer base and is expected to be one of the most active cross-border acquirers in the African region in 2015, according to this Deal Drivers Africa report by MergerMarket. Despite falling oil prices due to weakened global demand, the Gulf countries can be expected to maintain liquidity through surpluses amassed over the years, and will be looking for a place to park their cash.

New rules, new opportunities

Further indication that deal activity is booming in the Middle East is the rise in investment banking fees in the region, which reached close to $150 million in Q4 2014, up 19% from the previous year. Yet another sign that the MENA region is poised for growth is the increasing sophistication in certain regulatory regimes: the UAE recently introduced a new competition law regarding the acquisition of control, and tax regimes in the region have also been developing at a rapid pace. Products such as indemnity insurance have been gaining traction in the Middle East, signaling the growth of business opportunities in the region on a larger and more significant scale.

Inbound rebound?

Recent signs of recovery in the U.S. economy may have encouraged Gulf investors to become more active in 2014, as evidenced by the dominance of outbound M&A deal flow from the Middle East. Optimism for greater deal flow in the MENA region in 2015 persists, despite the looming uncertainty owing to declining oil prices and persistent geopolitical uncertainties. As outbound M&A from the MENA region is expected to grow in 2015, it remains to be seen whether inbound flows will be equally popular, particularly in light of political risks, new legal complexities, and persistent cultural differences between cross-border players.