Opportunity knocks for M&A activity in Middle East and North Africa

Notable M&A deals in the two regions in 2021 included Tamer Group acquiring Mumzworld, Aleph Holding buying a majority stake in Connect Ads and Bevy scooping up Eventus.

Since the start of 2021, more than $1 billion has been spent on acquisitions of VC-backed European start-ups, which is 10 times the numbers for 2020.

Notable M&A deals in the Middle East and North Africa in 2021 included Tamer Group acquiring Mumzworld, Aleph Holding buying a majority stake in Connect Ads, Bevy scooping up Eventus, Abwaab purchasing EdMatrix and Helium Health acquiring Meddy Inc.

As the ecosystem matures and dealmaking confidence grows, the momentum should continue in 2022. A number of factors drove the momentum in 2021. A maturing regional ecosystem expanded the pool of attractive acquisition prospects. MENA’s technology boom has catalyzed innovative and fast-growing companies with increasingly sophisticated products.

“ MENA’s technology boom has catalyzed innovative and fast-growing companies with sophisticated products ”

Entrepreneurs are also warming to M&A as a tool for cross-border expansion. While traditional organic growth is always appealing, founders are increasingly looking for non-organic avenues to scale, and are quickly realizing that buying market share or creating partnerships in new markets with like-minded entrepreneurs with complementary product offerings has its appeal. As long as the instant growth generated by a transaction is not the only element of a growth strategy, it can supercharge scale in a competitive, diversified and global marketplace.

Benefits for both sides

In a market where strategic and operational talent is scarce, M&A is also a vehicle through which an organization can ‘buy’ talent from a wider pool.

Inevitably, the pandemic has also been influential in driving deals. While some companies have thrived, others have had to pivot their business models and witnessed their valuations reduced from previous highs. This has increased the competitiveness of M&A deals.

When deal rationale is sensible, these types of transactions can be hugely beneficial for both sides by enabling operational synergies, taking advantage of economies of scale, and offering cross-selling opportunities to each other’s customer bases.

The acquisition of Meddy by Africa’s health tech leader Helium Health for an undisclosed price in November demonstrates this first-hand. Not only did the deal allow Helium to expand its offering to include B2C offerings, but it opened doors to sizable new markets and customers in the Gulf Arab states.

M&A comes with its own set of considerations. Timing, market context, strategy and shareholder alignment are crucial factors to account for with deals between companies of all sizes. History has demonstrated that some deals which promised much ultimately failed to deliver. That isn’t an inherent weakness in M&A, but reflects a failure to account for alignment in the decision to merge or acquire.

The future of M&A activity in MENA looks bright with inbound M&A in 2021 reaching its highest year-to-date total since records began. Increased activity has set a positive tone for 2022 with a strong pipeline and dealmakers eager for new opportunities.

Increasing liquidity events are creating further tailwinds for M&A activity in MENA. Active capital markets are a virtuous circle of confidence and momentum. MENA countries are starting to liberalize their capital markets; regulators and exchanges are collaborating constructively with underwriters who have a personal stake in introducing quality IPO candidates.

This all provides momentum for the capital markets ecosystem, and fast-growing companies’ place in it. Amid global economic uncertainty, MENA’s resilience, optimism and increasing maturity have shone through. We expect increased M&A activity to continue in 2022.

Basil Moftah is a general partner at Global Ventures, a Dubai-based growth-stage venture capital firm.