• Cross-border M&A activity made up 39% of all deal value and 34% of all deal volume in Q4 2016
  • Middle East Index doubled from 91 in Q3 2016 to 181 in the last quarter
  • UAE continues to dominate both inbound and outbound Middle East M&A
  • Inbound Middle East M&A deal value more than doubled that of 2015, while volume remains the same

Global cross-border M&A activity dipped slightly in 2016 compared to the previous year, as a result of turbulent and unpredictable global events, but the Middle East saw robust cross-border M&A activity, particularly on inbound deals, according to Baker McKenzie's Cross-Border M&A Index*.

Despite political and economic uncertainty, the global market remained fairly resolute from Q3 2016 to Q4 2016, with a 2% uplift in volume and only a 1% drop in value compared with the previous quarter, and overall market conditions still looking good for long-term deal making.

The global Index, which tracks quarterly deal activity using a baseline score of 100, was 249 in the final quarter of the year, only down 1.5% from the previous quarter, but a significant 30% fall from this time last year where 2015's record-breaking fourth quarter Index hit 358. Despite the fall in deal making, the Index in Q4 still remains higher than it was at its launch in 2009 through to 2013.

Half of the top ten deals of the year were either in the technology or energy and utilities sectors, and in Q4 the Technology sector led by value with US$66.9bn in deals, whilst the Industrials sector led by volume, with 227 cross-border deals (worth US$19bn).

Cross-regional Middle East M&A activity

Despite being a long way off Q4 2015's record-breaking Middle East Index figure of 591.5, the Q4 2016 Index of 181.6 doubled that of the third quarter (91.2) and underlined the continued strength of cross-regional M&A activity in the region, with the United Arab Emirates (UAE) as the dominant country for both inbound and outbound deals in Q4 2016.

"Cross-border M&A activity in the Middle East has seen a robust year of deal making in spite of investor uncertainty and market instability," said Will Seivewright, Corporate/M&A Partner at Baker McKenzie Habib Al Mulla, based in the UAE. "The remarkable increase in cross-regional deal value and the steady flow of deals for 2016 bodes well for M&A in the coming year."

George Sayen, Head of Corporate Practice Group at Baker McKenzie's associated firm in Riyadh, added, "Cross-border M&A activity in the region has fared relatively well in 2016 notwithstanding global political and economic volatility. Looking forward, we expect Saudi Arabia's Vision 2030 to generate considerable deal activity in specified sectors such as technology, healthcare, education, and transport".

Inbound Middle East M&A

The value cross-regional M&A deals targeting the Middle East for 2016 more than doubled that of 2015, rising from US$3.95bn to US$10bn, attributable to a few mega deals in the Transportation and Energy & Utilities sectors. Inbound cross-regional deal volumes for 2015 and 2016 remained the same, with 29 deals each year.

The UAE was the standout target country by volume for both Q4 and full year 2016, with 18 of the 29 deals in 2016, followed by Oman with three deals and KSA with two. Kuwait was the top target country by value for 2016, with Hapag-Lloyd's US$5.4bn acquisition of Kuwait's United Arab Shipping Company.

The Transportation sector was top by value for 2016, with deals valued at US$5.53bn, and the Energy & Utilities sector was top by volume for the year, with six deals valued at US$3.6bn.

Outbound Middle East M&A

Outbound cross-regional deals fueled by the Middle East totaled 74 deals in 2016 (similar to 2015's 72 deals), with the UAE driving 36 deals, followed by Qatar and Bahrain with 16 and nine deals respectively.

Although the UAE drove four of the top five deals by value for Q4 2016, Qatar topped the full year 2016 deals by value with deals worth US$13.35bn, driven by the US$11.27bn investment in Russia's Rosneft Oil Company by a consortium led by Qatar Investment Authority. The KSA's Public Investment Fund's US$3.5bn investment in Uber Technologies was the second largest deal of 2016 by value.

The top sector by value for 2016 outbound M&A was the Energy & Utilities sector, with US$12.2bn worth of deals, and the top sector by volume was the Consumer sector, with 12 deals.