Oil-rich Gulf monarchies are channeling more international deals via state-backed firms instead of the region’s sovereign wealth funds, as they seek to diversify their economies and win more global heft.
Alongside billions of dollars of sovereign investments, state-run companies in the United Arab Emirates and Saudi Arabia — many of which are also backed by the wealth funds — have been involved in at least $50 billion in deals this year across sectors from telecommunications to renewables and gaming.
The shift in dealmaking highlights how Gulf states are seeking to fulfill their outsized international ambitions, while creating top global companies amid limited expansion opportunities at home. Such efforts dovetail with wider plans to attract investment and technology, as well as build new industries and manufacturing capabilities. The strategy emulates the example of countries such as South Korea, where companies like Samsung Electronics Co Ltd. have become household names.
Wall Street bankers are now spending more time building relationships with some of the Gulf region’s top companies instead of focusing all of their efforts on wealth funds. Many of these firms have recently appointed new management teams with dealmaking, investor relations and financial experience to carry out acquisitions.
In Abu Dhabi, which manages about $1.5 trillion of sovereign wealth and is home to funds such as the Abu Dhabi Investment Authority and Mubadala Investment Co., international expansion is being driven by the ambition of the ruling Al Nahyan family — and in particular Sheikh Tahnoon bin Zayed Al Nahyan.
The Abu Dhabi energy giant is hunting for deals to better compete with Saudi Aramco’s Sabic chemical unit, and to develop the company’s own downstream and renewable energy operations. Adnoc is in separate talks with Austria’s OMV AG about a potential merger of two companies they back, Borouge Plc and Borealis AG, to form a chemicals and plastics firm worth more than $30 billion.
The PIF has been bankrolling companies as the kingdom pushes deeper into sectors from sports to tourism through a series of high-profile acquisitions. The fund is using Savvy Gaming Group to spend billions buying esports tournament organizer ESL, casual game publisher Scopely Inc. and a stake in Nordic developer Embracer Group AB, making its mark in the video-game industry.Other international expansion attempts have been less successful.
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