(MENAFN) According to the regional head of private equity and sovereign wealth fund practices at Bain & Co, sovereign wealth funds in the Middle East are the primary driving force behind mergers and acquisitions (M&A) in the region. Gregory Garnier stated in an interview with Arab News that the activity rose to approximately 39 percent in 2022, due to the "acceleration of a long-term trend started a few years back."
Garnier attributed the rise in M&A activity in Saudi Arabia and the Middle East region to the high economic growth providing financial headroom to invest. In addition, sovereign wealth funds and companies accounted for 84 percent of all transactions, according to a recent report by Bain & Co. Private equity investors entered relatively few deals.
The top official of the American management consulting firm also noted that several positive factors fueled the growth of deals in the region. Increasing appetite from regional private owners to divest or welcome a strategic shareholder, privatization agendas of some countries in the region, and active scouting of local investors on deals were among the factors.
Garnier emphasized that the localization of international companies in the Gulf Cooperation Council (GCC) countries requires several key success factors, including a minimum demand to reach the minimum critical scale, favorable regulations, and incentives to allow economic sustainability versus imports. Sovereign wealth funds can play a critical role in securing those key success factors by providing direct support as well as coordinating with the relevant government bodies.
Overall, the rise in M&A activity in the Middle East region indicates the potential for further growth and investment opportunities. Sovereign wealth funds are expected to continue playing a significant role in driving growth through strategic investments and supporting key success factors for localization.
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