M&A activity in the Middle East: A global bright spot

The outlook for the Middle East region remains positive in terms of regional and international M&A activity on the back of a 2024 that recorded significant increases in both cross-border and domestic transactions. This activity was, as in previous years, led by the sovereign wealth funds (SWFs) and government-related entities (GREs) primarily in the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA), further cementing the region as a key player in the global M&A market.

Increasing activity

In a year where M&A activity in the West was subdued (likely due to economic uncertainties and political instability driven by a slew of elections), the Middle East increased its transaction activity from the previous year, both in terms of deal size and deal volume (the technology and consumer products sectors contributing materially to the latter).

The UAE and KSA continue to lead the way for the region, with economic diversification remaining the consistent theme for these governments. These countries (and others such as Qatar) have accelerated regional and international investment through new or recently launched investment platforms as part of their long-term visions, such as KSA’s Vision 2030 and the UAE’s Centennial Plan 2071, and this trend will therefore continue in 2025.

Inbound v outbound activity

These long-term ambitions are not only expected to lead to direct activity by the SWFs and GREs mandated to deliver on these goals; but it is also expected to foster inbound activity by virtue of private enterprises aiming to enter markets that are perceived to be growth areas in the region in the coming years and decades (such as tourism, technology, renewable energy, and healthcare). Foreign direct investment activity may also be further stoked by the ongoing commitments of some GCC states to privatise many of their State-held assets, whether in whole or in part. 

In addition, the international-friendly legal and regulatory frameworks within the UAE free zones are increasingly a reason for international investors to look to the region, for example as a place to base international joint ventures. This is expected to create a boom in the capital markets sector as well contribute to the M&A landscape.

However, transactions outbound from the Middle East are still likely to be the biggest contributor to activity in the region and we expect this to be the case in 2025. This will be driven by the ambition of the SWFs to take advantage of potentially depressed valuations in other parts of the globe and to also strategically strengthen their position in the world as global player. 

Transaction-related products such as warranty and indemnity insurance are also increasing significantly in their availability, cost-effectiveness, and general awareness to this market, which further helps facilitate many transactions and therefore grease the wheels on investment activity generally.

Potential hurdles 

The geopolitical landscape of 2025, however, is likely to be a factor in cross-border transactional activity and could be a negative influence in some circumstances. The Middle East, as a region, sits between the US and China (figuratively and literally), which means it is open to investment opportunities in those regions but may also be affected by political tensions that may make some transactions less attractive or achievable than they would ordinarily be.

Notwithstanding these potential headwinds, overall, we expect the direction of activity to follow the trajectory of the previous year and for the Middle East to remain a bright spot in the context of global corporate transactions in 2025.