With financing and confidence evaporating, M&A activity was significantly reduced in most markets across Europe and Africa in 2008. In the Middle East, however, deal activity remained much more buoyant.

It was initially hoped that the Middle East would remain immune to the global credit crunch, but that is evidently not the case. For example, Saudi Arabia's Tadawul All Share Index was down 47% at the end of the first quarter 2009, compared with the same period last year. The number of deals being done -- or at least those visible to the market -- has also been affected.

Reported deals are often just the tip of the "M&A iceberg." Although MergerMarket reported approximately 200 or so Middle East-related deals in 2008, with a deal value of greater than £11 billion ($16 billion), this doesn't tell the full story, as large businesses in the Middle East tend to be private, family-controlled businesses or, indeed, state-owned businesses, rather than publicly listed.

With no obligation to report public acquisitions or investments, the majority of deals in the Middle East go unreported. Often, these deals involve carefully and quietly selected buyers, approached by sellers that don't want to publicize their keenness to sell -- particularly in the current environment, where it may be viewed as a sign of a need to sell. These deals are often instigated and agreed to between two parties who will have known each other -- and their families -- for many years. These are the deals hidden below the M&A waterline.

So with less available data to consider, what does 2009 hold for M&A activity in the Middle East, and what characteristics will M&A deals in the region have?

First of all, there will be a marked dominance of domestic and regional Middle East M&A activity. There are better investment opportunities in the Middle East than in Western economies, and Abu Dhabi, Qatar and Saudi Arabian investors will lead such investments. They are in the best position, financially, to strike deals.

Saudi Arabia has a strong economy, with a large number of family-controlled conglomerates that are still actively doing deals locally in the country and, increasingly, regionally in the Middle East. Abu Dhabi and Qatar have smaller local economies but very well funded players.

Dubai is also a potentially interesting area for dealmaking, which may seem counterintuitive, in view of the challenges its economy currently poses. However, it is its weaker economy and higher borrowing levels -- compared with the rest of the Middle East -- that makes Dubai a possible location for participants having to do deals. Activity will focus around Dubai companies with limited financial resources selling to those with greater resources, with private equity and real estate players potentially on both sell side and buy side.

A second characteristic is outbound investment into the Americas and into Europe. If a business has the finance, now is an excellent time to buy assets that are showing very good value. With fewer buyers chasing these assets, Middle East investors are in a prime position to flex their financial muscles and take advantage, as seen by the recent proposed investment in Daimler AG and the investments into Barclays plc.

The third characteristic will be sector consolidation, and much of this will be private consolidation or below the radar. Investors may well keep operators in situ, post-acquisition, seeking to benefit from the reputation the operator holds and valuing the contacts they have built up.

While there won't be a deluge of deals, some will be significant in deal value -- with upper midmarket and multibillion-dollar deals common. More importantly, they are likely to be strategic purchases that enable companies in various sectors to become global powerhouses in the same way that Orascom Telecom Holding SAE has in telecoms. The year 2009 is shaping up as a defining year for Middle East businesses and M&A in the region.

Philip Broke is partner in White & Case LLP's M&A-corporate practice and leads the firm's sovereign wealth fund initiative.