EMEA M&A Outlook: Optimism and Opportunity
M&A in the EMEA region seemed to have bottomed out in Q1 2023 and H2 slowed after a bustling Q2. But the outlook remains relatively optimistic and opportunities appear to be out there for dealmakers this year.
Factors affecting M&A
The past year saw multiple interest rate hikes, and the European Central Bank’s (ECB) efforts are bearing results. Inflation has been on a downward trend since early 2023, and the risk of recession in the region seems to be diminishing. The European Commission also revised its 2023 GDP growth projections for the region up from 0.8% to 1.0%, and from 1.6% to 1.7% for 2024.
M&A value in EMEA has also stayed above the three-year quarterly low of US$142bn set in Q1 2023, per Mergermarket data. And despite tracking down through the latter half of the year, volume in H1 exceeded that of H1 2021.
However, mean deal size is around half of what it was two years ago, when megadeals flourished. That is unlikely to change meaningfully in the immediate future, but if the ECB begins to loosen monetary policy soon, deal sizes should begin to edge up.
Forecast bright for foreign investors and financial sponsors
The World Bank forecasts that growth in the Middle East and North Africa (MENA) subregion will see a marked deceleration to 1.9% in 2023, having expanded by 6% in 2022 as Gulf Co-operation Council economies earned a windfall from surging oil prices.
Nevertheless, foreign investors are showing interest in MENA, while local sovereign wealth funds (SWFs) have immense stores of investable capital and are willingly backing companies at home. As evidence of this, Turkey, the Middle East & Africa (including Israel and sub-Saharan Africa) is shaping up to be the most active market across EMEA in early 2024.
Financial sponsors should maintain their deployment in all areas of the middle market, the outlook for corporate activity in certain sectors looks bright, and SWFs remain highly motivated buyers. One word of caution, though – competition reviews are becoming stricter and this will no doubt disfavor large strategic tie-ups, requiring corporate buyers to proactively engage with authorities.
Find out more about the factors and trends expected to impact dealmaking in EMEA this year in Deal Drivers: EMEA 2024 Outlook.
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