Dyna.Ai focuses on the fintech sector in Saudi Arabia

RIYADH: Saudi Arabia led the Middle East in chemical mergers and acquisitions in the first quarter of 2024, with deals worth $500 million, latest data shows.

Data from financial markets platform Dealogic showed that total M&A transaction volume in the Kingdom during the period reached $955 million, with the chemical sector accounting for 52.4 percent of the total.

Saudi Arabia was the only country in the region to show activity in the sector, and a report from consulting firm Kearney earlier this month suggested chemical executives expect more mergers and acquisitions led by strategic investors such as national oil companies.

“Recent transactions by major players such as Aramco and ADNOC underscore the region’s commitment to using M&A as a key growth lever, setting the stage for the dynamic and transformational period ahead,” said Jose Alberich, then partner for the Middle East and Africa at Kearney .

Dealogic data showed that the second target sector was the professional services sector, with transactions worth $160 million, representing 16.8% of the kingdom’s total value.

Technology followed closely behind with a value of $138 million, accounting for 14.5% of the share.

The retail and insurance sectors accounted for 7% respectively. and 4.1 percent general.

Throughout the region

The figures showed that in the first three months of the year, the target M&A volume in the Middle East reached $6.21 billion, with technology being the leading sector with 42 deals worth a total of $1.56 billion.

Financials came in second place with nine deals worth $1.3 billion, while the oil and gas sector, which topped the list a year ago with deals worth $3.5 billion, dropped to eighth place with deals worth just $273 million.

According to Dealogic, domestic deals were the dominant factor, accounting for 55 percent of M&A volume in the Middle East across 91 deals. However, outgoing transactions accounted for 45 percent and included a total of 38 transactions.

Kuwait emerged as the largest contributor to the GCC’s total M&A transaction volume of $1.12 billion, all of which were outbound transactions.

The United Arab Emirates followed closely behind with transaction value of $988 million, of which 58 percent were domestic.

Saudi Arabia secured the third position with 18 transactions worth $955 million, of which 60 percent were outbound.

Compared to the same quarter of 2023, transaction volume in the Middle East decreased by 27%.

Global slowdown

In its report, Dealogic explained that global M&A activity saw a significant decline during the period, with deal volume dropping 31 percent to 7,162, marking one of the quietest quarters for dealmaking in nearly two decades.

The slowdown was largely due to high capital costs, with Switzerland being the only major economy to cut interest rates in 2024.

In addition, geopolitical tensions, including the emergence of the Middle East as a new hotspot coupled with ongoing conflicts involving Russia and Ukraine, and tensions between Washington and Beijing over Taiwan, have further contributed to reduced agreement-making activity.

Activity factors

In an article published in September, Boston Consulting Group said government support has been driving significant M&A activity among players in emerging markets, particularly in the Middle East, in recent years as companies seek to expand their global presence.

Saudi Arabia’s SABIC has acquired a 31.5 percent stake in Clariant, approaching the 33.3 percent threshold required to submit a mandatory takeover bid under Swiss law.

The United Arab Emirates’ state-owned ADNOC has acquired a 24 percent stake in OMV, increasing its indirect stakes in Borealis and Borouge, and is also in talks to merge them.

ADNOC also made an $11 billion bid for Covestro, which was rejected, and expressed interest in Brazil’s Braskem. These moves highlight the trend of using government support to expand regional reach and integrate into global value chains

Additionally, Saudi Aramco acquired Valvoline Inc.’s global products business in 2023. for $2.7 billion. According to BCG, this acquisition expands Aramco’s lubricants portfolio by integrating Valvoline’s manufacturing and distribution network and its research and development capabilities.

The study highlights three additional key drivers of changes in macro trends in M&A, portfolio diversification, vertical integration and technology acquisition.

Companies are increasingly expanding their portfolios through acquisitions to enter new markets and product segments, often for longer periods of time. Additionally, the focus has shifted from traditional commodity-driven acquisitions to sustainable diversification of petrochemical value chains, prioritizing higher-margin and less cyclical businesses.

In short, this means that instead of focusing primarily on acquiring companies to secure raw materials, the focus is now on achieving balanced and sustainable growth across the entire petrochemical value chain. The current priority is to invest in businesses that generate higher profits and are less susceptible to market fluctuations. This change aims to create a more resilient and profitable business model in the long term.

This strategic focus on specialization promotes vertical integration of downstream segments, as evidenced by significant acquisitions by industry leaders such as Saudi Aramco, SABIC, Thailand’s PTT and Malaysia’s PETRONAS.

According to the BCG document, gaining or maintaining a leadership position in the field of technology is a key factor influencing mergers and acquisitions. Acquisitions and joint ventures are key to positioning companies as major suppliers in the electromobility segment and the related electronics chemicals and batteries industry.

As the demand for sustainable solutions increases, companies are increasingly recognizing the potential of e-mobility. Through strategic mergers and acquisitions, including technology acquisitions and investments in research and development, they strive to provide a competitive advantage in this rapidly growing market.

According to Dealogic, technology-focused deals accounted for 21% of global M&A activity in the first three months of 2024, followed by healthcare with 14% and finance with 11%.

Oil and gas was 9%, utilities and energy were 7%, and real estate and real estate represented 5% of total M&A activity.

Artificial intelligence attracting funds

The Dealogic report highlighted that the world’s largest technology deals were powered by artificial intelligence. The surge in artificial intelligence has significantly boosted Nvidia’s market capitalization to $2.4 trillion, and the company has invested in seven AI-related companies during this period.

According to a March report by The New York Times, Saudi Arabia also plans to create a fund worth $40 billion for investments in artificial intelligence.

The report shows that the project, scheduled to launch in the second half of 2024 and spearheaded by the Saudi Arabian Public Investment Fund, aims to attract partnerships with US venture capital firm Andreessen Horowitz and other financiers.

It will focus on supporting various artificial intelligence ventures in Saudi Arabia, including chipmakers and large data centers, the NYT wrote at the time.