MENAFN - Arab News
UAE- Sophistication is new hallmark of regional investors
(MENAFN - Arab News) This month saw a further step forward in the regional banking market when France Telecom acquired 94 percent of Egyptian mobile phone company Mobinil in a tender offer.
With this deal, the French group has taken control of a significant sector player in a volatile but important emerging market.
This deal isn't just significant because of its size " although at 19 billion Egyptian pounds it is one of the largest ever cross-border M&A transactions in Egypt - but also because it shows that a market-changing deal can be achieved despite a challenging macro environment.
While this is only one deal, and doesn't indicate a 'return to normal' - I think it is a very good example of the way we should expect the regional market to continue to develop.
If we look at the market only few years ago, much of it was private and many deals were executed on a company to company basis within their respective domestic markets.
Typically, family-owned companies were making "unilateral" decisions to acquire a competitor or expand through acquisition.
The common theme was that these deals were typically small and done on an ad hoc basis - moreover, the approach and structuring seen in international centers of M&A just wasn't there.
So what changed? First, the market started to show an appetite for larger intra - regional and cross-border deals.
Typically, these were companies looking for faster expansion than available in the private peer to peer or domestic market.
Banks were engaged by companies to help them look for specific opportunities, in specific sectors - complementing their overall regional investment strategy. Such opportunities where not necessarily immediately apparent to the company. And, while these opportunities where often regional in focus, they weren't necessarily small scale.
When we advised, last year, on the rights issue " the raising of capital through the issuance of new shares - for Mannai Corporation and the resulting purchase of 35 percent of Axiom, this was an international standard deal, but done 'intra' regionally.
Second, the market has started to show a real willingness to open up to international investors - improving standards and adopting higher levels of corporate governance.
While historically many regional entities have had lower levels of corporate governance than those in the West, this is definitely changing and that's a positive step for the region.
Of course, this is an ongoing process and not one that will be achieved over night.
The UAE and Qatar are still not officially classed as 'Emerging Markets' according to the MSCI Emerging Markets Index.
Future inclusion is not a foregone conclusion - but when ultimately they are successful, this will then lead to more international investment money coming into the region.
At present, these markets are classified as "frontier" and very little institutional money follows the MSCI Frontier indices.
Third, this region has the funds, and the willingness to look at international investment opportunities. Regional investors have shown an appetite for international opportunities that compliment their portfolios, and it's my view that this will grow.
Last year, we advised Lamprell - a UK-listed UAE-based corporation - on the purchase of Maritime Industrial Services (MIS), an Oslo listed entity. Not only did this demonstrate HSBC's cross border capability, it was also an excellent example of "Emerging into Developed Market" deal flow from the region, where a strong local company acquired in the 'developed' market.
The next question surely has to be where we see the regional banking market going.
Will the future of the local market be driven by 'intra' region, 'into' region, or 'out of' region deals?
My view is that there's no one answer to this and it is likely to be a combination of the above.
However, the regional investment banking market has been massively impacted by the events of the Arab spring and the fall out from the euro zone. As we've often stated, the M&A market is primarily driven by market sentiment - and then by the identification of deal opportunities.
To deal with market sentiment first: this will return, but it will take time.
What we'll need is for some deals to come to the market, in size and with success.
This happened with the France Telecom deal, but this remains only one deal and clearly international investors will want to see more. Our pipeline of deals remains strong, but the fragile nature of the market means that timing of execution remains of paramount importance.
Our clients rely on us for informed, expert advice and we will have to be sure that the 'window' is open for a deal to be a success before we launch.
Second - and most obviously - deal opportunities remain important.
Regional investors have grown in both sophistication and size. Therefore, a deal has to be 'right' for them - rather than just a good opportunity. It has to fit with their strategy, portfolio and aspirations.
Clients want their banks to work harder for them, and identify opportunities that they can't necessarily identify themselves - so, those that exist in other countries, regions and sectors.
So, where do I see the market going? We remain positive on the MENA region and its growth prospects.
It has a number of strong fundamentals - such as increasing hydrocarbon wealth and young populations.
These fundamentals haven't been altered by the Arab Spring.
But what is changing is the level of sophistication of our clients.
I think we are seeing the emergence of real international players from the region, who have the skills, the funds and the appetite to go where the deals are.
- Paul Skelton is head of global banking, MENA, at HSBC, Dubai.
MENA News Headlines
|Mar 10 2014||Cash-strapped Morocco courts US investment ,AFP|
(MENAFN - AFP) Morocco's finance minister on Monday urged US businesses to boost investment in the country and take advantage of "unprecedented" regional growth, as the cash-strapped government ...|
|Mar 10 2014||Doha Insurance to launch rights issue at USD120m ,MENAFN|
|(MENAFN) Doha Insurance announced its intention to offer additional shares to shareholders, Arabian Business reported.
The company"s bid aims to raise around USD119.9 million and double its ...|
|Mar 10 2014||ME oil, gas transactions led by Oman, UAE, Iraq ,MENAFN|
|(MENAFN) Combined oil and gas transactions in the UAE, Oman and Iraq accounted for around 60 percent if total upstream transactions in the Middle East, Times of Oman reported.
The number of ...|
|Mar 10 2014||Oman plans to divest stakes in state-owned firms ,MENAFN|
|(MENAFN) The Omani government announced its intention to divest its stake in state-owned companies through initial public offerings (IPO), Times of Oman reported.
Executive President of Capital ...|
|Mar 10 2014||Makkah hotel industry posts steady growth ,MENAFN|
|(MENAFN) The city of Makkah is confident that it will continue to enjoy steady business growth, pushed by the positive presence of convenient room occupancy rates, Saudi Gazette reported.
The city ...|
|Mar 10 2014||Saudi construction projects at USD195b in 3 years ,MENAFN|
|(MENAFN) Planned construction projects in Saudi Arabia in the following three years are estimated at USD195.4 billion, Saudi Gazette reported.
The Big 5 Saudi has launched and is expected to ...|
|Mar 10 2014||Dubai non-oil trade up to USD361b in 2013 ,MENAFN|
|(MENAFN) Dubai"s non-oil foreign trade surged USD25.58 billion last year, hitting a record USD361.7 billion, Khaleej Times reported.
India was the emirate"s top trading partner in the year as ...|
|Mar 10 2014||SW China Forest on Fire, Casualties Unknown ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Firefighters are battling to extinguish a forest fire in southwest China's Yunnan Province, according to China's News (Xinhua). A total of 2,320 people, including 250 ...|
|Mar 10 2014||Waiting and Searching for Missing Malaysian Flight Continue ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Chinese warship Mianyang has arrived at the waters suspected to be the site of the missing Beijing-bound Malaysian jetliner, military sources said on Monday. The warship ...|
|Mar 10 2014||Amnesty Accuses Syrian Forces of Committing War Crimes in Yarmouk ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Amnesty International has accused the Syrian government forces of starving the population and targeting doctors in Yarmouk refugee camp in the outskirts of the capital ...|
|Mar 10 2014||Qatar's Mutaz Essa Barshim Wins Men's High Jump Gold Medal ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Qatar's Mutaz Essa Barshim claimed gold medal in the Men's High Jump Final during day three of the IAAF World Indoor Championships at Ergo Arena on Sunday. The ...|
|Mar 10 2014||Al Sadd and Al Arabi Share Spoils in Qatar Stars League ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Al Arabi and Al Sadd drew Saturday 1-1 in the 22nd round of Qatar Stars League.
Ibrahim Khalfan took the lead for Al Sadd in the 70th minute. It took Al Arabi only ...|
|Mar 10 2014||Kuwait Probes Deaths of Dolphins along Its Coast ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Kuwait's Environment Public Authority (EPA) has launched a probe into the causes of dolphin deaths along the country's coasts overs the past few days. EPA's Deputy ...|
|Mar 10 2014||Qatar - Filmmaker Noujaim to Address Northwestern University Students ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Academy Award-Nominated Director of The Square, Jehane Noujaim will be the graduation speaker at Northwestern University in Qatar's ceremony on May 4, the university ...|
|Mar 10 2014||Ukraine Could Sign EU Agreement Later in March ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Ukraine said Sunday it could sign later this month part of a crucial EU agreement for greater integration, even as the former Soviet state remains in a state of upheaval. ...|
|Mar 10 2014||Public Security Director General Inaugurates 30th GCC Traffic Week ,Qatar News Agency|
|(MENAFN - Qatar News Agency) HE Director General of Public Security Staff Major General Saad Bin Jassim Al Khulaifi inaugurated on Sunday the events and activities of 30th GCC Traffic Week in the ...|
|Mar 10 2014||Arab FMs Approve Agenda of Kuwait Summit ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Kuwait's First Deputy Prime Minister and Foreign Minister Sheikh Sabah Khaled Al-Hamad Al-Sabah said Sunday the 141st session of the Arab League Council has approved the ...|
|Mar 10 2014||Qatar - HE the Prime Minister Condoles Afghan President ,Qatar News Agency|
|(MENAFN - Qatar News Agency) HE the Prime Minister and Interior Minister Sheikh Abdullah bin Nasser bin Khalifa Al Thani has sent a cable of condolences to Afghan President Hamid Karzai on the death ...|
|Mar 10 2014||Omani Official Meets Qatari Administrative Development Minister ,Qatar News Agency|
|(MENAFN - Qatar News Agency) Oman's deputy premier for cabinet affairs, Fahd bin Mahmoud al Said, conferred on Sunday with Isa Saad Al Jafali Al Nuaimi , the Qatari administrative development ...|
|Mar 10 2014||Qatar - HH the Emir Sends Cable of Condolences to Afghan President ,Qatar News Agency|
|(MENAFN - Qatar News Agency) HH the Emir Sheikh Tamim bin Hamad Al Thani has sent a cable of condolences to Afghan President Hamid Karzai on the death of First Vice-President Marshal Mohammad Qasim ...|