Egypt M&A posts spectacular rebound in 2021 | White & Case LLP

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Curiosity in high-growth industries reminiscent of TMT and monetary providers resulted in a string of offers—from each native and worldwide bidders.

Egyptian dealmaking delivered a powerful efficiency in 2021. A complete of US$6.7 billion modified fingers—the very best annual deal worth in 9 years.

With 22 offers recorded, annual quantity elevated by 38% year-on-year, signifying a returning confidence available in the market following a difficult 2020.

M&A exercise by worth 2016 – 2021
Goal location: Egypt Bidder location: International Sectors: All Sectors

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Cellular cost demand fuels offers

The expertise, media, and telecom (TMT) sector housed the very best valued deal of the yr: Vodafone’s sale of a 33% stake in its Egyptian arm to Vodacom Group, South Africa’s largest cellular operator by subscribers. Valued at US$1.6 billion, the deal will see Vodacom broaden its cellular cash choices, together with its Vodapay and M-Pesa platforms, into Egypt, which presents funding potential as a result of its younger and largely unbanked inhabitants. The deal is predicted to end in double-digit income progress for Vodacom.

Egypt’s cellular funds business is rising quick—it’s estimated to document an annual progress price of 19.3% to achieve US$22 million by 2025. In response to rising demand, the Egyptian authorities has taken steps to advertise funding within the nation’s fintech house. The newest step is Egypt central financial institution’s challenge of licenses enabling contactless cell phone funds, introduced in September 2021.

And in July 2020, Egypt’s authorities launched a knowledge safety regulation selling on-line banking. Such regulatory adjustments intention to remodel Egypt’s fintech business right into a regional heart for worldwide funding.

Monetary providers attracts lion share of offers

Whereas the TMT sector attracted the very best valued deal of the yr, it was the monetary providers sector that proved the driving pressure behind Egypt’s dealmaking exercise. 4 out of the highest ten offers of the yr happened inside the sector.

The most important of those modified fingers between two Egyptian corporations: Banque Misr’s US$767 million acquisition of a 90% stake in CI Capital Holding. By its buy of the diversified monetary providers group, which presents a variety of providers reminiscent of funding banking, analysis, and asset administration, Banque Misr will develop its non-banking monetary providers platform, with the intention of selling monetary inclusion throughout Egypt.

The second largest monetary providers deal of the yr highlights curiosity from corporations elsewhere within the MENA area: First Abu Dhabi Financial institution’s US$600 million buy of Financial institution Audi Egypt, a subsidiary of Lebanese financial institution Audi Group. Following completion of the transaction, First Abu Dhabi will turn into one of many largest worldwide banks working in Egypt.

One other deal highlighting the worldwide attraction of Egypt’s banking sector is Bahrain-based Arab Banking Company’s (Financial institution ABC) US$600 million buy of BLOM Financial institution Egypt, introduced in January. The deal is predicted to greater than triple Financial institution ABC’s market share in Egypt—doubling its variety of branches whereas additionally diversifying its service choices.

Outbound exercise picks up

Egyptian dealmakers, in the meantime, seem like changing into extra assured transacting offers abroad. The most important outbound deal of the yr was pushed by personal fairness curiosity in renewables—EFG Hermes’ acquisition of a 49% in Spanish renewable vitality developer Ignis Energia, valued at US$726 million.

The deal is the most recent in a string of cross-border offers focusing on renewable property, as the worldwide drive to scale back carbon emissions fuels funding within the sector.

One other notable abroad deal was Elsewedy Electrical’s US$60 million buy of Indonesia-based PT CG Energy Techniques—a developer of energy transformers. The deal marks Elsewedy’s bid to broaden its presence within the Southeast Asian market, consistent with its worldwide enlargement plans.

Outlook

Following a difficult 2020, dealmaking focusing on and carried out by Egyptian corporations in 2021 shows a rising confidence available in the market. The long run seems set to enhance additional, as Egypt’s financial system continues to emerge from the turmoil of the worldwide pandemic. Financial progress is forecast to broaden from 3.3% in 2021 to five% in 2022, in line with the World Financial institution. The bettering financial outlook depends upon the continued rollout of COVID vaccines, together with profitable containment of future variants.

However 2021’s robust rebound in M&A exercise highlights the enduring attraction available in the market, significantly inside the fast-growing TMT and monetary providers sectors, with native and worldwide consumers alike fast to grab alternatives as they seek for post-pandemic progress. Egypt has cemented its place as a key marketplace for regional enlargement plans inside the MENA area.

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