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More GCC banking mergers, PE investment deals looming, says expert

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The GCC region is expected to see another round of bank mergers in the coming months, even as many private equity and venture capital funds eye distressed assets, a top sector expert has revealed.

Technology, healthTech, eduTech and pharmaceuticals are among the sectors which are expected to see big-time PE and VC fund investments in the short-to-medium term, Amer Lakhani, executive director and head of banking and financial services, EMA Partners, UAE, told Arabian Business in an exclusive interview.

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“The consolidation trend in banking, commenced a couple of years ago, is set to accelerate in the coming months in the wake of faster digitisation and branchless banking,” he said.

“The serious erosion in the value of bank assets in a host of pandemic-hit industries such as tourism, hospitality, real estate and retail will add to the consolidation move,” Lakhani added.

Amer Lakhani, executive director and head of banking and financial services, EMA Partners, UAE

Lakhani said there are around 50 local and foreign banks operating in the UAE alone and individual banks will be forced to close more branches going forward, leading to reduction in staff in retail banking as further digitisation is embraced.

“This could result in further M&A, particularly among some of the smaller banks,” he said.

The GCC region has witnessed significant consolidation in the banking sector in the recent years, including the merger of National Bank of Abu Dhabi and First Gulf Bank in 2017 to form UAE’s largest bank, First Abu Dhabi Bank, and the merger of ADCB, Union National Bank and Al Hilal Bank, and SABB and Alawwal Bank in Saudi Arabia.

On the investment front, Lakhani said PE firms are currently actively pursuing opportunities in sectors which they believe will weather the current storm and succeed in the long-term.

“Technology ventures, especially in healthcare and education segments, as also some of the pharma companies are on their radar,” Lakhani said, without revealing the names of the companies or PE funds which are currently involved in negotiations.

National Bank of Abu Dhabi and First Gulf Bank in 2017 to form UAE’s largest bank, First Abu Dhabi Bank

“At the start of the pandemic, PE firms and investors were sitting on their hands. But for the last few months, a number of PE firms are smartly and opportunistically looking at distressed assets or real estate that have been impacted by the pandemic,” Lakhani said.

He noted that many companies in sectors that have seen and continue to see scope for fast growth and innovation are also seeking funding in the short term to help fuel further growth.

These sectors include life sciences, technology, consumer goods essentials, biotech, education technology, chemicals and e-commerce.

The merger of ADCB, Union National Bank and Al Hilal Bank in 2019

“The process (of finalisation of negotiations) is taking a lot longer especially for higher value tickets which require physical diligence,” Lakhani said, adding that this was particularly the case with overseas PE firms because of flight and other restrictions caused by coronavirus.

Mubadala, Beco Capital, Wamda Capital, Shorooq Partners, Hala Ventures, 500 Startups, ADQ, Phonecian Funds, Hambro Perks, Middle East Venture Partners (MEVP), Saned Equity Partners and Venture Souq are among the leading Middle East-based investment funds.