LEBANON Trends and Developments Contributed by: Joseph Nasrallah, Jad Skaff and Mia Chbeir, HNS Legal
Certain investors and private equity funds have taken advantage of distressed valuations by acquiring finan - cially strained businesses – particularlycompanies with established brands or longstanding family own - ership – with the objective of operational restructuring and future recovery. The Central Bank has encouraged bank consolida - tion to improve financial stability; however, local banks have remained cautious, despite the adoption of banking sector restructuring legislation, pending its practical implementation and broader economic reforms. Ongoing hostilities between Lebanon and Israel have affected many regions of the country, and continue to influence investor confidence. Uncertainty regarding the potential scope of the conflict, including broader regional tensions involving Israel and Iran, remains a consideration for investors, including members of the Lebanese diaspora. If tensions persist, business operations and supply chains may experience periodic disruptions, affect - ing valuation assessments, due diligence processes and transaction timing. Such conditions may influence recovery prospects and, in turn, investor appetite for M&A activity in Lebanon is concentrated in a limited number of sectors, with real estate currently account - ing for a significant share of transactions. Investors from the Gulf region are showing increased interest in Beirut’s prime locations and coastal areas along the Mediterranean. Family offices and other opportunis - tic buyers are focusing on distressed properties, and transactions frequently involve the acquisition and redevelopment of underutilised assets. Although these investments remain attractive, they often depend on government approvals and infrastructure availability, which may affect transaction timing and execution. Despite sustained investor interest, transaction eco - nomics have changed. Successive budget laws, including the 2024–2026 budget frameworks, have re-indexed real estate taxes and registration fees to market exchange rates. As a result, closing costs have longer-term M&A transactions. Sector-specific M&A activity
increased significantly, ending the period in which transactions benefited from registration fees calcu - lated at the historical LBP1,507 rate and materially affecting transaction pricing. The energy sector is another area of considerable interest. Offshore oil and gas discoveries have led to anticipation regarding potential foreign investment. Major international oil companies have executed exploration agreements, yet drilling operations have been repeatedly delayed due to political disagree - ments and maritime border issues. Should explora - tion commence, related M&A activity could develop in supporting industries, including oilfield services, logistics and downstream processing, particularly through joint ventures, service company acquisitions and infrastructure partnerships. The healthcare sector is also consolidating. Hospitals, laboratories and clinics are merging to pool resources, reduce costs and maintain operational viability amid escalating expenses. International healthcare provid - ers continue to value Lebanon’s medical workforce; however, transactions often require careful structuring due to regulatory approvals, staffing retention consid - erations and payment system constraints. Beyond the traditional sectors, recent deal activity has increasingly focused on renewable energy and business process outsourcing (BPO). The collapse of the national power grid has turned decentralised solar energy projects into a growing asset class attracting private equity and venture capital investors seeking predictable long-term returns. At the same time, Leba - non’s skilled workforce has positioned BPO and soft - ware-outsourcing companies as acquisition targets for regional groups, particularly as these businesses generate hard-currency revenues while maintaining a localised cost base. These sectors are particularly attractive because foreign-currency revenue genera - tion has become a central consideration for investors in the Lebanese market. Key trends on Lebanon’s M&A scene One of the most notable trends has been the rise of distressed asset acquisitions. Over recent years, Leb - anon has witnessed a wave of distressed company transactions driven by liquidity constraints and limited
753 CHAMBERS.COM
Powered by FlippingBook