(MENAFN- Khaleej Times)Forecast by global law firm Baker & McKenzie predicts global transactional activity exceeding $3.4 trillion in 2017 based on global economic activity increasing to an average growth rate of 2.9 per cent per year over the next three years.
Dubai - The UAE and Saudi Arabia are among the world’s top 10 countries forecast to experience the fastest M&A (merger and acquisition) and IPO growth until 2020 reveals a new forecast by global law firm Baker & McKenzie.
After a long recovery from the global financial crisis the forecast in association with Oxford Economics predicts global transactional activity exceeding $3.4 trillion in 2017 based on global economic activity increasing to an average growth rate of 2.9 per cent per year over the next three years compared to an annualised 2.5 per cent since 2012.
The report indicates that M&A activity in the UAE will rise from $2.2 billion in 2014 to $6.8 billion in 2015. The forecast also shows that deal activity will stabilise from 2016 to 2020 albeit with a peak of around $5.7 billion in 2018.
“Strong M&A activity in the UAE in the first half of 2015 is expected to result in a significant increase in the value of completed M&A deals by the end of the year compared to 2014 despite the volume of deals remaining relatively flat” said Will Seivewright Corporate/M&A partner at Baker & McKenzie Habib Al Mulla based in Dubai. “We expect M&A transactions to peak in 2018 before slowing as part of a predicted downturn in global financial markets.”
The new report titled ‘Global Transaction Forecast: The Impact of Macro Trends on Future M&A and IPO Activity’ in partnership with Oxford Economics undertakes quantitative assessments and predicts activity across completed M&A and IPOs in 37 countries until the end of 2020.
Linking economic outlook with corporate activity the report has used modelling techniques relating to historic changes in transaction flows.
The report draws on structural and cyclical transaction drivers including national income growth equity prices and interest rates.
As per the findings domestic IPO issuance is projected to fall in the UAE from $3 billion in 2014 to $581.7 million in 2015 before peaking at $1.2 billion in 2018. In Saudi Arabia it is expected to fall from $6.4 billion in 2014 to $1.8 billion in 2015 before peaking at $2.7 billion in 2019.
“Despite these dampened prospects Saudi Arabia is off to a strong start this year driven by an increase in domestic M&A deals” said George Sayen head of corporate practice group at Baker & McKenzie’s associated firm in Riyadh (Legal Advisors Abdulaziz I. Al-Ajlan & Partners in Association with Baker & McKenzie Limited). “The opening of the Saudi stock exchange to foreign investors could also attract foreign capital inflows and increase cross-border activity.”
Governments in the UAE and Saudi Arabia are diversifying their economies and facilitating job creation to reduce the impact of oil price volatility and grow their non-oil economies. Ultimately this will allow the GDP in both countries to grow with an annual rate of 3.5 per cent and 3.2 per cent respectively compared to the global average of three per cent.
The report also includes a ‘transaction attractiveness’ index by country based on past transactional activity and a weighted average of 10 key economic financial and regulatory drivers of M&A and IPO activity.
The UAE is forecasted to rank higher than the global average with key drivers such as ease of doing business freedom to trade and legal structure.
“We expect the increased interest from global private equity investors to continue notwithstanding the lower oil prices and regional instability. While the UAE continues its efforts to grow its non-oil economy and works towards hosting the World Expo in 2020 regional demographics will continue to have the biggest impact on growth and deal activity particularly in respect of social infrastructure transactions” added Seivewright.
The forecasts show completed global M&A transactions rising to $2.7 trillion in 2015 before accelerating to $3 trillion in 2016 and $3.4 trillion in 2017.
The value of cross-border transactions will rise by 17 per cent in 2015 to $1.03 trillion. This will represent 38 per cent of total deal activity in 2015 although this share is projected to subsequently drop back slightly in 2016.
M&A activity relating to emerging markets will grow dramatically rising by 56 per cent to $678 billion by 2018 up from $435 billion in 2014.
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