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Consumer-led sectors dominate M&A deals in KSA - PwC

Consumer-led sectors dominate M&A deals in KSA - PwC
Photo Credit: Arabianeye-Reuters

Riyadh - Mubasher: A late flurry of mergers and acquisitions (M&A) announcements and activity in the fourth quarter of 2016 brought a more positive conclusion to a slow year for M&A deals in Saudi Arabia, said PricewaterhouseCoopers (PwC) in a recent report.

A “wait-and-see” approach to transactions reflected wider local and global economic challenges. However, deals were executed and momentum is building for a stronger 2017, according to a PwC report issued on Wednesday, entitled: “Saudi M&A landscape: Reflecting on 2016… and why 2017 will be better”.

According to the PwC report, consumer-led sectors, such as retail and leisure, healthcare and pharmaceuticals, and education, dominated the M&A transactions market constituting 55% and 48% of 2015 and 2016 activity, respectively, up from 25% in 2014.

The energy sector’s contribution dropped from 20% in 2014 to almost 5% in 2016, the report noted.

The integration of the secondary stock market in Saudi Arabia is expected to enhance the appetite for M&As. The involvement of regional and international private equity (PE) firms is set to increase cross-border activity, with 38% of Saudi targets in 2016 acquired by PE investors, according to PwC.

The report found that 62% of Saudi investors are acquiring international targets, with the top key investment destinations being the UAE, Kuwait, Germany, and South Korea.

The Saudi government has identified and earmarked 26 entities and agencies in the Kingdom as having the potential for private sector participation.

“The privatisation agenda will create further M&A opportunities for international and regional investors and operators,” PwC said.

Key sectors expected to be affected by the wave of privatisation in Saudi include healthcare, transportation, and education.