Future Investment Initiative (FII) Update
With regional uncertainty a major feature of global newsfeeds, the FTI team approached FII not knowing what to expect. Trepidation about the way ahead, the retreat of capital deployment in the face of a risk-on environment? Not a bit of it. And it’s a measure of the region’s maturity, and that of the global markets more broadly, that sentiment was strongly positive, the mood light with no let-up in terms of ambitions. The theme this year was AI with exceptionally senior and experienced panelists debating the opportunities and threats, supported by an AI Avatar who summarised those debates with unnerving accuracy while answering questions with remarkable prescience.
While some headlines have focused on a more domestically weighed deployment of capital by key sovereign wealth funds in the region, many were quick to respond that this does not mean a row-back internationally.
The deal activity in 2024 has been fascinating.
Outbound investment continues at pace. ADNOC has made a $12.5bn offer for Covestro, a move into speciality chemicals similar to the minority interest taken in Clariant by SABIC and the first major acquisition made by a Gulf company in Germany. Elsewhere, Masdar has been tearing across Europe buying development opportunities and operating portfolios in the South East Mediterranean (Terna) through to a stake in the UK’s Dogger Bank South offshore wind projects, with other ongoing opportunities in the Baltic and Serbia.
The PIF is taking a stake in London Heathrow Airport partnering with Ardian; Mubadala, CDR and Stonepoint acquired Truist Insurance, a local megadeal at a value of $12.4bn; ADIA investing in Qlik, a data and analytics business alongside Thoma Bravo and Fisher Investment in a $10bn deal. Others have invested alongside KKR and Blackstone. There’s a real appetite for co-investment situations at scale.
Overall in Q3 2024, outbound MA& has far outstripped inbound with the latter being at the highest levels since 2021. In contrast, inbound activity has been subdued, continuing the trend from a pre-pandemic high in 2029. In the first nine months of this year overall deal value was down 45% versus 2023 (versus 10% down globally) but deal volumes up 7% versus negative 13% globally. Much of this is to do with lumpy sizeable deals last year rather than a trend. Of the 155 deals done in the Gulf this year, the UAE accounted for 98, KSA 47 and Kuwait 10.
What's Next?
M&A: there seems to be an inherent bias towards thinking about westward investment out of the Gulf. But with huge populations to the east of the region and a strategic need for closer trade and investment relationship with Gulf energy companies and with investment and trade almost doubling since 2021 to $757bn, this axis will only develop further.
It’s no surprise that 2023 was a bumper year for the Gulf-APAC M&A axis. PIF, ADIA and QIA have all been active alongside the totemic investment in EV maker Nio by CYVN Holdings. 2024 has seen ADNOC L&S purchase a large majority stake in Navig8 valued at over $1bn and ADQ, in the 2nd largest deal into APAC, acquiring 49% of infra-investor, Plenary, a deal that’s been highlighted as a platform for future investment in public and social infrastructure.
Despite the usual slowdown in third quarter volumes, momentum in the IPO market remains very strong in the GCC, particularly in the UAE and the KSA. Aftermarket performance across IPOs in the region in 2024 has been impressive, with the majority of the top 10 listings by deal size trading ahead of the IPO price. Oversubscription rates remain high, particularly for government-led privatization carve outs across energy, transport and infrastructure. Local retail investors continue to pour funds into these well-marketed offerings combined with strong institutional interest globally. NMDC Energy was the largest listing in the third quarter, oversubscribed 31 times, raising $877m on the Abu Dhabi Securities Exchange in September. Looking to 2025, there is a healthy pipeline of companies across a diverse range of sectors preparing for upcoming IPOs in the first half of the year. This activity is fuelled by strong investor confidence, underpinned by robust economic growth, diversification strategies away from oil and gas, infrastructure investment, and the GCC’s growing profile and positioning as a leading, accessible global financial hub. One of the few bright spots in otherwise challenging global IPO markets.
In conclusion, it’s very easy to read too much into statistics that can be overtly influenced by one or two very large deals. The message we heard, and most importantly we could feel as an undercurrent at both FII and during our meetings with clients and contacts in the UAE, remains consistent: the core drivers are unchanged. Economic diversification, strong fundamentals including diversification, the regulatory environment and the wider transformation agenda, as well as megatrends including AI and climate change remain as central as ever. The ambition of the region remains bright and is a stark reminder to older members of FTI Consulting of Hong Kong in the 80s and 90s, New York as Reagan deregulated or Thatcher’s ‘big bang’ in the City of London. These market opportunities will continue to grow which is why we as a firm have been and will continue to invest significantly in the region. Watch this space!
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The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals. FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm. FTI Consulting is an independent global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. FTI Consulting professionals, located in all major business centers throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges and opportunities. ©2024 FTI Consulting, Inc. All rights reserved. www.fticonsulting.com |
