x Abu Dhabi, UAETuesday 23 January 2018

US bankers profit in return of dealmaking

Investment banks are cashing in on a resurgence of deal making among companies in the region.

Investment banks are cashing in on a resurgence of dealmaking among companies in the region, with more of them said to be seeking advisers and financing to undertake mergers & acquisitions (M&A) and form joint ventures.

M&A fees totalled US$188 million (Dh690.4m) during the first quarter of the year, an increase of 53.3 per cent compared with the same period last year, according to data from Thomson Reuters.

Completed M&A deals in the Middle East and North Africa have totalled $3.9 billion during the year, an 85.7 per cent increase on the same period last year.

There are "quite encouraging" signs of mergers and acquisitions and new joint venture deals returning to the Arabian Gulf as the regional economy recovers, said Klaus Froehlich, the head of investment banking at Morgan Stanley in the Middle East and North Africa.

The US investment bank has been the region's most active dealmaker in terms of volumes this year, according to data from Mergermarket.

"Clients are moving ahead and are hiring banks," Mr Froehlich said. "There are companies which have signed off internally to pursue acquisitions, mergers and other projects, many of which are cross-border in nature. "Globally, investment banking fees totalled $19.8bn during the first quarter, up 6 per cent compared with the same period last year, Thomson Reuters' data showed.

US banks dominated, following the slowest first quarter for investment banking fees in Europe and the Asia-Pacific since 2009.

The majority of companies in the region seeking to do deals are based in the Gulf rather than North Africa or the Levant, Mr Froehlich added.

Egypt and Morocco have been particularly active targets for M&A deals within the past few months, with over-leveraged European firms retreating and Gulf companies moving in.

Société Générale and BNP Paribas have both sold banking operations in Egypt to Gulf lenders, while France's Vivendi is in the midst of a sale of its stake in Morocco's Maroc Telecom, with firms including Etisalat, Qatar's Ooredoo, and KT Group all reportedly making bids.

Orascom Telecom has also been the target of a $3.7bn takeover bid from a unit of Russian telecoms firm Altimo. The increase in transaction volumes contrasts with a dearth of deals during the past few years, when economic growth was more anaemic and banks had less capital to lend.

Many investment banks hit hard by the financial crisis, including Nomura, Deutsche Bank and Credit Suisse, decreased staff in the regionor relocated workers to London, although recently this trend has gone into reverse as US banks including Citibank and JPMorgan increased staff.

However, in spite of growing deal activity in the Middle East, economists remain sanguine about the outlook for economic growth in the Gulf, with Capital Economics forecasting that the fragility of the UAE's banking sector will restrain business investment.