M&As Poised to Continue Growth in 2021 as Optimism Returns to Saudi Market

Despite the COVID-19 crisis creating business uncertainty across the Middle East and North Africa (MENA) region, including Saudi Arabia, 2020 has still been an eventful year for mergers & acquisitions (M&As) market, according to Bader Alamoudi, senior country officer for JP Morgan – Saudi Arabia. In 2020, M&A activity was driven by companies looking to streamline costs and boost efficiency and optimization, particularly during periods of prolonged uncertainty, Alamoudi told Argaam in an interview. “As in previous years, the financial sector has been one of the most active in terms of M&A activity in the region during 2020. The consolidation theme has created a ripple effect on other sectors, including energy, real estate etc., where we have started to witness heightened activity. I believe such activity will continue next year as well,” he said.

Alamoudi believes high-quality assets that are less cyclical in nature, such as infrastructure-type, will continue to attract interest from local and international investors. “Several M&A discussions during the pre-summer period were put on-hold, however, the momentum has considerably picked up and a lot of new opportunities are currently being explored,” Alamoudi noted. In 2020, issuances in regional debt capital market (DCM) were more agile, with the respective governments doing an outstanding job in laying the ground for other government related entities (GREs) and corporate institutions entering the market, he pointed out.

Saudi Arabia’s Public Investment Fund (PIF) in May said it bought stakes in companies including BP Plc, Boeing Co., Facebook Inc. and Walt Disney Co. during the pandemic. It also invested in India’s Reliance Retail Ventures Ltd. and Jio Platforms, and three sector-specific exchange traded funds (ETFs). “Regional sovereign issuers were the first movers to tap in DCM during the pandemic, which made it easier for others to follow. The institutions took advantage of ample liquidity within the overall system,” Alamoudi said.

Plans for 2021

In Saudi Arabia, the US investment bank advised National Commercial Bank (NCB) on its US$15.6 billion acquisition of Samba Financial Group. Previously, the lender also advised on the mammoth initial public offering (IPO) of oil giant Saudi Aramco. JP Morgan will continue to expand its presence in the Kingdom by introducing new products and hiring more people, Alamoudi said. “Today, we operate in all lines of business in the Kingdom, with 85% Saudization rate and 33% female employees,” he added. “We continued our hiring spree in Saudi Arabia during the pandemic as well,” Alamoudi further stated.

The stimulus packages announced by the Saudi Central Bank (SAMA) proved to be an immense source of cash flow, as it helped ease up the payment burden on firms. Alamoudi expects the improvement in oil prices to re-kindle retail confidence and fuel bigger investment banking activities next year. “2021 is going to be a very interesting year with lots happening across all lines of business. Consolidation in many sectors will continue, with a strong pipeline in DCM and equity capital market (ECM),” he concluded.