Egypt continues to drive growth in the regional M&A space
After a challenging couple of years, the Egyptian M&A landscape seems to be showing resilience, recording a 21% year-on-year increase in mergers and acquisition (M&A) deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, primarily due to currency instability.
The Middle East and North Africa’s most populous country had a turbulent couple of years, with its economic troubles worsening in 2022 due to the outbreak of war in Ukraine; meanwhile, closer to home, the conflict in Gaza further intensified economic pressures. The Egyptian pound nearly halved in value over 2022-2023. This, combined with post-COVID inflation, pushed up the cost of imports, resulting in inflation peaking at 38% in September 2023.
The situation now looks to have improved. This has largely been driven by a US$35 billion investment from the UAE, which enabled key reforms – particularly around currency – and helped reduce inflation, as highlighted in our latest PwC Middle East Economy Watch.
Additional support from the International Monetary Fund (IMF), World Bank, and European Union (EU) also helped avert a potential crisis. Preliminary agreements between the IMF and Egyptian authorities, granting access to around US$820 million, are expected to significantly reduce near-term external financing risks. Collectively, these developments have created more opportunities for deals, as noted in the 2024 TransAct mid-year update.
Strong M&A activity with notable deals in H1 2024
As reported in the TransAct H1 2024 update, M&A deals in the Middle East in the first half of 2024 stood at 214 – a 4% decline from H1 2023, compared to a 25% drop globally. This underscores the Middle East's ongoing resilience, standing out against other regions despite shared macroeconomic challenges and complex geopolitical factors. In Egypt, there was an uptick in the number of deals, with 46 M&A transactions involving Egyptian targets completed in the first half of 2024, up from 38 deals in the same period in 2023.
The largest announced deal in H1 2024 in Egypt, completed at the beginning of the year, was ICON's acquisition of a 51% stake in seven state-owned hotels located in Cairo, Alexandria, and Aswan, for a total of US$800 million. This transaction was among the five largest M&A deals in the Middle East in H1 2024.
Other notable deals in H1-24 include B-Investments Holding's acquisition of a majority stake in Orascom Financial Holding SAE, valued at US$50 million, and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.
This marks a sharp contrast to 2023, a challenging year for Egypt. A combination of factors, including uncertainty around the devaluation of the Egyptian pound, interest rate hikes, and general economic concerns, contributed to a notable downturn in M&A deals in Egypt. The number of deals during this time plummeted by 53% year-on-year to 139, with the total value declining by 62% to US$3.48 billion. Cross-border deals, often an indicator of international investor interest, experienced an even more drastic decline in Egypt, dropping by 80% in total value compared to the previous fiscal year.