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MidEast bankers see M&A rebound in 2011-report
Bankers see 20 pct rise in M&A volumes - report * Saudi Arabia's mid-market sector seen most active; Buyer/seller discrepancies, valuations still a concern.
February 13, 2011 4:14 by Reuters
Mergers and acquisitions activity in the Middle East is expected to show a rebound in 2011 despite there being some concerns over buyers and sellers remaining at odds over prices, said a survey released on Sunday.
The value of deal activity in the region is on average expected by the bankers to rise 20 percent this year to between $28 billion and $30 billion, according to the report released by M:Communications and business information provider Zawya showed.
“Many people feel that the worst is over and a number of investors expect growth is going to rise,” Nicholas Lunt, managing director of M:Communications told Reuters.
Qatar and Saudi Arabia are seen as the most active markets with most bankers expecting the financial services sector to be the main area for deals. Middle East M&A values fell sharply during and after the financial crisis with buyers demanding better due diligence before making a purchase and sellers sticking to valuations at pre-crisis levels.
“Quality of due diligence is a concern and there is definitely a problem in the case of realistic valuations,” Lunt said.
Investment banks operating in the Middle East earned slightly higher fees in 2010, data from Thomson Reuters showed, but overall activity remained subdued and the region’s share is still miniscule when compared globally.
Mergers and acquisitions fees accounted for 47 percent of the overall activity, down from 55 percent in the previous year, according to Thomson Reuters data.
The Middle East will see only a gradual pick-up in M&A activity in 2011, as potential sellers wait for asset prices to recover further, the head of investment bank Moelis & Company told Reuters in an interview in January.
Key drivers for deal activity in 2011 will be large-scale restructurings of debt-laden firms in the region and sellers coming down to realistic valuations, the M:Communications report said.
“The largest M&A revenue source for us has been in restructuring: it’s a very remunerative area, especially in the Middle East and will most likely remain so in 2011,” one international banker was quoted as saying in the report.
“We can charge larger fees because it is a value-added skill for which clients pay a premium and not many banks have focused on this skill.”
Other catalysts include regulatory and legal reforms and political support for deals, bankers said in the survey.
HSBC Holdings , Europe’s biggest bank, took the top position in the investment league table for the region with total fees of $37.9 million, a published by Thomson Reuters last month showed. Barclays Capital followed with a total fees of $31.5 million.
(Reporting by Dinesh Nair; Editing by Greg Mahlich)