M&A transactions in Saudi Arabia to grow over next 2 years

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Mergers and acquisitions (M&A) activity in Saudi Arabia will increase in the coming years, with a particular interest in the Materials, Industrial and Construction sectors, Insurance, Transportation, Real Estate development, Retail and Food Services, and Automotive Sector, KPMG Al Fozan & Partners, an audit, tax and advisory services provider in Saudi Arabia, said in its latest report.

Expressing optimism about M&A in the Kingdom, KPMG said the government’s focus on reforms in a number of areas including laws and regulations would contribute to the acceleration of M&A activities in 2018. Saudi Arabia continues to make changes to regulations with a view to attract investments into the country. The recent inclusion of Saudi Arabia in MSCI’s Emerging Markets Index has resulted in a significant positive impact and will continue to do so. KPMG stressed that they expect M&A activities in those sectors will contribute to strengthening the financial position of companies, reducing costs, transferring knowledge, reducing operational and financial risks and increasing competitiveness.

Global merger and acquisition (M&A) deal-making is expected to see another robust year in 2018, with predicted appetite and capacity for deals both expected to increase by 5 per cent and 17 per cent, respectively, a report said.

This compares favorably with 2017, when predicted appetite was relatively flat at 1 per cent, according to KPMG International’s 2018 M&A Predictor report.

The report noted that the next 12 - 24 months will be an exciting time for M&A in the Middle East . Most of the activities will be led by the Kingdom of Saudi Arabia as the country is undertaking a massive transformation to diversify its economy.

KPMG’s report revealed that this year is certainly off to an encouraging start and continues what was a strong Q4 in 2017, with M&A deals in the first quarter of 2018 soaring just past $1 trillion – a healthy jump from $749 billion in the first quarter of 2017.

Commenting on the report, Abdullah Al-Fozan, Chairman of KPMG MESA and KPMG Saudi Arabia, said: “There are more or less two types of transactions that are happening and are expected to happen in the market: M&A activity driven by a consolidation anticipated to happen in certain sectors of the private sector and M&A activity driven by increased investors’ appetite to participate in sectors expected to become the engine of the Kingdom’s future economy.”

“Sectors that I expect to witness accelerated growth include technology, social infrastructure, financial services, healthcare, education, consumer retail, sports and entertainment,” said Al-Fozan.

He stressed that the Saudi market will witness a leap in M&A activities during the current year as investors and transaction makers gain confidence in the positive fundamentals of the Saudi economy.