Gulf mid-market mergers thriving as economy matures
The Gulf region is experiencing a surge in mid-market mergers and acquisitions as the economy matures. Western investors are now looking to the Gulf for opportunities, signaling a shift from Middle Eastern businesses investing outward. AGBI’s corporate advisor, James Jarvis, notes that growing international private equity interest in mid-sized Gulf companies is driven by several factors.
A decade ago, capital flows were predominantly outward from this region. However, there has been a shift towards more two-way interactions as global firms aim to grow their presence in the GCC markets. This change has led to increased innovation and talent inflow, sparking a rise in mergers and acquisitions activities. While significant deals like Abu Dhabi’s Adnoc acquiring German plastics maker Covestro hit the headlines, mid-market acquisitions between $30 million to $250 million are the fastest-growing in this region.
Major investment banks focus on more substantial transactions, leaving room for smaller firms like Lumina to facilitate mid-market deals. Jarvis highlights an uptick in transactions in this space, emphasizing the shift towards a new wave of acquisitions. In 2024, there were 522 M&A deals in the Middle East and North Africa, with a notable 20% year-on-year increase in inbound deals, showcasing a changing landscape in the region’s financial activities.
Jarvis outlines three principal reasons behind these thriving deals. Firstly, as the GCC economy matures, businesses funded by venture capital are evolving into stable enterprises requiring additional financing for further growth. Secondly, many Gulf family-run conglomerates are focusing on core business areas, leading to divestments and acquisitions to streamline operations. Finally, the rise of regional champions aligned with the government objectives calls for strategic acquisitions.
International private equity firms are now viewing the Middle East more as a source of deals rather than a place solely to find investors. This shift reflects the region’s dynamic growth appeal amid stagnating economies elsewhere. A key factor driving acquisitions in this region is the alignment with global standards, setting the stage for sustained mid-market activities in 2025.
Traditionally, Gulf-based acquirers self-funded their deals; however, there is growing interest in financing through debt. International buyers leverage external financing sources like debt, debt funds, or private equity to fuel transactions, aligning the Middle East market with global practices. Notably, sectors like industrial services and food and beverage industries attract a significant share of investors due to the Gulf’s demographic and economic growth trends.
The surge in acquisitions within business services, supported by regulatory changes, marks an emerging trend in mid-market activity. Notable deals like the US-based Stagwell acquiring Dubai’s Create Group underscore the region’s growing allure for foreign companies. As more US businesses seek opportunities in the region, the prevalence of acquisitions is expected to continue throughout 2025, reinforcing the Gulf’s position as a pivotal market for mergers and acquisitions.