The M&A landscape in MENA is changing rapidly with the region witnessing a number of high-profile deals in the insurance segment over the past few years. The momentum is expected to continue in future, said panellists at a virtual M&A insurance roundtable recently.
A virtual M&A insurance roundtable organised by Middle East Insurance Review in October carried the theme, ‘The Continuing Pandemic and Geopolitical Tensions - Do M&As Deliver or Do Movers Get Value for Deals?’ saw some in-depth discussions on the topic with experienced M&A professionals from the region.
M&A trends
Highlighting the current trends from the region, Badri Management Consultancy managing director Hatim Maskawala said that the past couple of years have seen quite a number of deals go through in the region.
“Saudi Arabia is the market leader in this segment as there is a focus from the regulator to consolidate and to avoid a fragmented industry,” he said.
The region also saw a number of M&A deals happen in the UAE, Bahrain and Kuwait which were closer to acquisitions than mergers. “The trend has started in the region and we expect to see more M&A happening in the future,” said Mr Maskawala.
Newton Insurance board member Faris Gammoh said that the critical drivers in M&A deals are the focus on synergies and cost optimisation. “The growth element must be rationalised through cost optimisation.”
Risk Exchange chairman Aftab Hasan said that the landscape in the region was changing substantially with even government-backed companies looking to invest in fintech and InsurTech start-ups. “The local domestic industry must learn from the AXA-GIG deal, which was a true M&A deal in the region,” he said.
Enhancing growth and profitability
Clyde & Co legal director Roshanak Bassiri Gharb said that data is the bread and butter for any M&A deal to go through and the role of legal firms is to raise red flags for companies during the M&A deal process.
“We need to provide adequate inputs for any M&A to happen and since the onset of the pandemic some aspects have changed and so both parties are more careful now while entering deals,” she said.
Fairfax Asia consultant Sanjeev Jha said that building a larger organisation is no more sustainable and so both the buyer and seller in an M&A arrangement must approach the deal in friendly terms. “Expense rationality is critical, apart from growth and enhancing profitability,” he said.
Mr Maskawala said that when two entities come together operational integration becomes important.
The road ahead for M&A in MENA
Dr Jha believes that there is a lot of smart money coming into the industry. “High efficiency companies with high customer retention will be in demand,” he said. He sees InsurTechs getting licences to operate in a number of markets in the region.
Mr Hasan said that technology will drive the insurance landscape in the region. “Spread your investments on a long-term basis to generate returns,” he said.
Mr Gammoh said that managing the balance sheet efficiently and using technology are critical for companies in the region while Mr Maskawala believes that a flat rate approach will not work in the MENA region, which is driven by motor and health.
“Companies need to analyse their strengths before they get into a M&A deal,” Mr Maskawala said.
Ms Gharb said that the MENA region must learn from the western experiences in M&A. Consolidation, she said, “will make it better for customers and we will see more diversity in the market”.
“It’s a very vibrant marketplace and there is a lot of opportunity there,” she said.
The session was moderated by Clyde & Co partner Mr Wayne Jones. M