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Qatar boosts Middle East M&A to highest level since early 2008

[DUBAI] Mergers and acquisitions with Middle Eastern involvement last quarter hit their highest level since early 2008, boosted by outbound investment by wealthy Gulf funds and companies, according to a Thomson Reuters study.

The value of announced M&A deals with any Middle Eastern involvement jumped to US$22.7 billion in the fourth quarter of 2014, more than double the value in the previous quarter and the highest total since the first quarter of 2008.

The calculation includes a US$9.1 billion offer for Songbird Estates, owner of London's Canary Wharf financial district, by Qatar Investment Authority and US investor Brookfield Property Partners. That deal has not so far been completed and some major shareholders in Songbird are still evaluating the offer.

The data suggested signs of a US economic recovery encouraged Gulf investors to become more active last year. For 2014 as a whole, M&A with Middle Eastern involvement climbed 23 per cent to US$50.3 billion, the highest total since 2010.

Outbound M&A surged 74 per cent to US$26.0 billion, the highest annual total since 2009. Qatar's overseas acquisitions accounted for 65 per cent of all Middle Eastern outbound M&A, while acquisitions by United Arab Emirates companies provided 15 per cent and Saudi Arabian firms, 9 per cent.

However, acquisitions into and within the Middle East remained sluggish, reflecting political uncertainties, legal and cultural barriers to takeovers, and, towards the end of the year, the plunge of oil prices.

M&A that originated and occurred inside the region fell 12 per cent to US$14.0 billion during 2014, while inbound M&A that originated outside the Middle East shrank 30 per cent to US$4.2 billion.

Middle Eastern equity and equity-related issuance totalled US$11.4 billion last year, a 173 per cent leap that was largely due to the US$6 billion initial public offer of Saudi Arabia's National Commercial Bank, the biggest IPO ever conducted in the Arab world.

Debt sales were curbed by instability in emerging markets and the approach of US interest rate hikes; Middle Eastern bond issuance in 2014 decreased 6 per cent to US$37.0 billion.

Investment banking fees ticked up during the last quarter but for 2014 as a whole, they fell 3 per cent to US$751.7 million.

Equity capital markets underwriting fees soared but fees from debt capital markets and syndicated lending slumped; fees from completed M&A deals totalled US$159.2 million, down 5 per cent.

HSBC earned the most investment banking fees in the Middle East during 2014, a total of US$56.9 million. Lazard topped the Middle Eastern completed M&A fee table, while HSBC was first in the ECM and DCM rankings. Mizuho Financial Group took top spot in Middle Eastern loan fees.