Green deals help Mideast M&A activities return to pre-pandemic levels: BCG
With the Middle East showing the highest level of green activity globally, the region’s mergers and acquisitions activities have returned to pre-pandemic levels, a new report has stated.
According to the Boston Consulting Group report, the Middle East recorded 283 M&A deals in the first three quarters of 2022 — an increase of 16 percent from the same period last year — with a total value of $23.8 billion.
The BCG report titled ‘The 2022 M&A Report’ showed a clear upward trend in ‘green’ deals over the past decade, with the strongest acceleration occurring in 2021 when Middle East deal volumes nearly doubled to 10.3 percent following two softer years for broader M&A activity and green transactions.
Over the past ten years, the report said, the energy and utilities industry had the highest share of green M&A and the largest increase, showing a 98 percent increase in deals from 2020-2021, contributing to 10 percent of M&A deals in the Middle East in 2021.
Asia-Pacific was the second-most active region, with a green deal share of approximately 8 percent in 2021.
The report also forecasts that environmental considerations will motivate an increasing number of deals moving forward, as ‘green’ M&A deals increased from 5 percent in 2020 to 10.3 percent in 2021. It suggests that more dealmakers are recognizing the value-creating potential of these transactions.
“Green deals are very hot in the region. Soaring sustainability transactions in the Middle East are a clear outcome of established national transformation programs seeking out diverse economic outputs for countries on their path to net zero,” said Ihab Khalil, managing director and senior partner, BCG.
“As the region continues grounding itself as a hub where collaboration and diversification can bear fruit, so will green mergers and acquisitions.”
With Saudi Arabia’s plans to rely on renewables for 50 percent of its electricity generation by 2030 and aims for net-zero carbon emissions by 2050, the Kingdom is fertile ground for green M&A deals.
Last year saw the government’s non-oil revenues cover 40 percent of its spending by the end of 2021, after covering only 10 percent previously.
To help with the region’s move to diversify from dependence on hydrocarbons, the Middle East Green Initiative was launched by Crown Prince Mohammed bin Salman in 2021. It was aimed at reducing carbon emissions from regional hydrocarbon production by more than 60 percent.
The crown prince announced last month at the UN Climate Change Conference in Egypt that Saudi Arabia will contribute $2.5 billion to the Middle East Green Initiative over the next 10 years and host its headquarters in the Kingdom.