Middle East unrest to delay regional deals: StanChart
Expect regional deal activity to be flat compared to last year; restructuring-related M&A deals to take more time; lender focusing on fragmented industries for deals
March 21, 2011 6:07 by Reuters
“In terms of regional activity, we also see any increased interest when it comes to cross-border deals not only in the U.S. or Europe but also towards Asia and Africa,” Pilarczyk said.
The bank is also eyeing several fragmented industries in the region — such as healthcare, power and education — which are ripe for consolidation, the executives said.
Completing deals in the region still faces several constraints including reluctance of sellers to lose control, value gap between buyers and sellers and a clear disinterest to depart with trophy assets, the executives said.
Dubai, which is emerging from a crippling debt crisis, is restructuring state-linked firms and will need to make asset sales to repay creditors of its Dubai World conglomerate.
Bankers in the region were expecting to generate fees from restructuring-related M&A activity, but few deals have been announced yet as sellers have bought more time to restructure debt from banks and are waiting for asset values to rise.
“There is a certain lack of willingness here in the region to face difficult decisions and restructurings come along with making those difficult decisions,” Pilarczyk said.
On Saturday, UAE telecom firm Etisalat scrapped its $12 billion offer to buy a controlling stake in Kuwaiti rival Zain , citing Zain’s divided board, extended due diligence and regional unrest.
“The Zain/Etisalat deal clearly shows how difficult it is to do an M&A deal in this part of the world,” said Pilarczyk.