UBS Sees Middle East M&A Revival as Bank Leaps Up League Tables

Industry: Banking 2016-11-03

UBS Group AG’s investment banking business is set to have its best year advising on Middle Eastern deals in at least a decade as the firm’s new strategy in the region pays off.

The bank is ranked first as an adviser on deals for Middle Eastern and African targets so far this year, according to data compiled by Bloomberg. It was unranked in last year’s tables and hadn’t cracked the top five since 2009, the data show.

“In 2014, as we introduced our new strategy and we were still building our track-record in the region, many people had written us off,” Alberto Palombi, the bank’s head of the Middle East and North Africa investment banking said in a telephone interview. “Now the results show this is working.”

That strategy involves a focus on fewer clients and using lending more selectively, Palombi said. The more limited focus and balance sheet means that the company doesn’t have any conflict in advising clients and there’s no pressure to cross-sell products and services to customers, he said.

Deal making has accelerated in the region as countries and companies look for ways to diversify their investments away from oil. Money spent acquiring companies in the Middle East and Africa almost quadrupled last quarter from a year earlier to about $30 billion, the most in at least 12 years, according to data compiled by Bloomberg.

“We are very selective about the clients we work with and we prefer to have fewer clients where we can add the most value and they stick with us,” he said. “In following our strategy, we naturally lost some mandates in the region, but our core set of clients see this as a positive because they know that when we say we can deliver a particular task, we invariably execute on it.”

First Gulf, ADIA

UBS has been focused on rebuilding its investment banking business in the region after scaling back in 2013 as part of a wider effort to boost profitability. The Zurich-based bank cut about 10 investment banking jobs in Dubai and relocated other executives during the period, a person familiar with the matter said at the time.

The Swiss lender was the sole adviser to Abu Dhabi’s First Gulf Bank PJSC in its merger with National Bank of Abu Dhabi PJSC, which created the Middle East’s largest bank by market value. UBS also advised sovereign wealth fund Abu Dhabi Investment Authority on its purchase of a 16.7 percent stake in SSE Plc’s Scotia Gas Networks distribution business.

Moroccan lender Attijariwafa Bank used UBS on its purchase of the Egyptian operations of Barclays Plc in October and the bank worked with China’s HNA Aviation Group Co. in its deal to buy a stake in SR Technics, a Swiss aircraft maintenance service provider, from Abu Dhabi’s Mubadala Development Co.

Oil Pressure

Palombi said M&A activity in the region will continue as lower oil prices pressure governments and companies to improve efficiency by consolidating fragmented industries and selling non-core assets.

“Our view is that the revival of M&A activity in the region is set to continue,” he said. In addition to acquisitions, “a lot of the IPO and equity capital markets activity has been put on hold, but we expect that could come back next year if markets remain stable.”

Palombi, currently based in Dubai, joined the firm in 2012 after his colleague at Bank of America Corp., Andrea Orcel, was named co-head of UBS’s investment bank. Orcel became president of the investment bank later that year.