March 14, 2010
MENA M&A Cross Border Deals and State Structure
Toying around with financial data, a summary table about intra MENA deals since 1992 (it doesn't necessarily include the purely private deals).
A very quick glance reveals an interesting trend: the states which have the least cross border acquirers are Algeria (2), Iraq (0), Libya (4), Syria (1), Sudan (0), Tunisia (1) and Yemen (0). A notable fact also is, the only cross border deal a Tunisian company made was backed by Saudi private equity.
Rows: Target Nation
Columns: Acquiror Nation
|Algeria||Bahrain||Egypt||Iraq||Jordan||Kuwait||Lebanon||Libya||Morocco||Oman||Qatar||Saudi Arabia||Syria||Tunisia||Utd Arab Em||Yemen|
|Utd Arab Em||7||4||8||12||4||4||17||188|
Let’s make the table speak:
- Obviously, Gulf Countries are much more active than the others. There’s a wealth effect.
- Egypt has a lot, I would assume it’s a size effect. That is particularly true when you consider the fact that Egypt makes 1/3 of MENA’s population and doesn’t make much better than Lebanon, Morocco and Jordan combined which altogether makes barely more than a third of Egypt’s population.
- In light of that, Egypt is underperforming. Why? The list of worst countries below have a history of socialism – except for Tunisia and Sudan. Egypt also has a history of socialism.
- Sudan is probably a special case in that it has characteristics of SS African countriesas much as MENA’s, with associated conflicts and underdevelopment. We’ll leave it aside. You may notice that Comoros and Somalia do not even appear either (meaning they haven’t had even local deals since 1992), for the same reason.
- Socialism apparently overcomes oil benefits since it prevents the creation of wealth. Libya, Algeria and Iraq should be in the Gulf club with their oil resources if it wasn’t for their socialism, and subsequent wars and poverty.
- So is the relation between socialism and underperformance of acquirers a coincidence?
I am not sure yet. The possibilities are government red tape which is characteristic of the legal/bureaucratic systems inherited from socialism. The other possible factor is the culture of patronage it instates – this one would explain what happens in Tunisia.
Morocco, for example, is not oil rich and has a similar legal structure to Tunisia’s. However it isn't totalitarian and has allowed the existence of some (relatively) independent business tycoons. Most of their cross border acquisitions have been done by the ONA (the royal holding), the government, or Miloud Chaabi (a relatively independent business tycoon/politician). Is this statistically significant? No. But one could try inferences from limited data. Egypt for example, which departed earlier from socialism, has the Sawiris family, with the Orascom group responsible for a big chunk of the cross border acquisitions.
But it’s not the only axis of development. Egypt, Lebanon and Jordan, seem to benefit from a geographical and/or cultural integration with the Gulf which the Maghreb doesn’t have. Many of the deals in those countries involve Gulf companies, shareholders or investors in one way or another. And within the Maghreb, Morocco seems to have a broader Arab vision than Tunisia.
Just my two cents...
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Interesting, where's the data set from?
Also does it not seem a bit narrow to look at only inter-Arab deals? Comparators (as ANIMA recently did) with major other investor categories is interesting (in particular the stunning vapour ware rate of the Gulf).
Posted by: Lounsbury at March 19, 2010 03:11 PM
The dataset is essentially from SDC, crossed, completed, cleaned and compiled against BvDEP Osiris and other Internet sources (mainly news websites).
I did indeed look at world-wide deals (the table is much longer).
A very quick look indicates that when it comes to MENA acquirers including non MENA target, the picture is very similar, same laggers, same challengers, same leaders. In terms of targets for MENA acquirers, favorite destinations in absolute number of deals outside of MENA are Germany, France, the UK, the US, Switzerland, India, Spain, and to a lesser extent Australia, Canada, Turkey and China. Some major OIC and other EU countries also receive quite a few deals. SSA - including OIC members - and Latin America in particular get almost nothing. It's interesting that appetite for MENA targets by MENA acquirers is relatively among the highest at a quick glance, suggesting a higher level of regional integration than one would expect given a tendency to lip service without substance to Arab cooperation.
I will go into the details of some of these and comment on MENA targets by non MENA acquirers later.
Posted by: Iskandar Haddad at March 20, 2010 11:38 PM
Well, re MENA outgoing to Europe / Rest of World, I think there are a couple of issues:
(i) for Gulf into North Am, EU, a lot of this is done via UK or US based entities through which Sovriegns pass their deals, may not be caught (esp the rather more discrete Kuwaitis);
(ii) Size effects may bias (that is discrete deal versus size of deal, the 355 Egyptian is how much capital?), as MENA deals are structurally smaller in general (ex Gulf in recent years.
I do agree overall it looks that Egypt, given its size and geography advantages relative to a honey-pot of capital (Gulf) actually substantially under-performs. The socialist past clearly has an effect there, as it does in even more cretinous Algeria.
SSA I think one is going to see more of going forward, historically before c. 2006 there was very little going on.
Posted by: The Lounsbury at March 22, 2010 06:39 AM