E-commerce in the Middle East is still emerging and there are a lot of small start-up companies replicating existing proven business models and looking to be acquired by larger international internet companies, according to a report in mergermarket. Once a company generates a turnover of, say, $1m, the shareholders then try and sell it for about $15m. According to one United Arab Emirates telecoms analyst: “It is like the 2000 internet bubble.” He added that the management at these companies do not have the long-term goal of building a business.

In June, for example, mergermarket reported that eBay Asia Pacific, a privately held Seoul-headquartered online auctions company, was seeking internet-related business targets in south-east Asia and the Middle East. It had about $50m to spend on full acquisitions, joint ventures and partial stake buys, according to the report.

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In August, privately held Jordanian company Jabber Internet Group also reported that it was looking for acquisitions in the e-commerce space. Discussions had been held with Danat E-Ventures of the UAE about two of its websites (bezaat.com and logta.com), the report said. Another UAE-based firm, IT distribution company Octagon International, is actively hunting to acquire IT distribution companies in Middle East and Africa.

The first e-commerce deal in the region closed in June. Launched in January 2010, GoNabit, was the Middle East’s first group-buying website. Based in Dubai, it was acquired by Washington, DC-based LivingSocial. Terms of the deal were not released. Dan Stuart, CEO of GoNabit, told mergermarket that the acquisition of his company could encourage other merger and acquisition activity.

"We attracted interest from various sources for investment, and for many of them that did not invest they may look at us as a missed opportunity. These potential investors now may not want to miss out on the next opportunity and so we could see some acquisitions being made," said Mr Stuart. He added that there are fewer investors operating in the Middle East looking for deals in the $500,000 range than there are investors looking in the $5m to $10m range.

Lucia Dore is head of GCC and Middle East at mergermarket, part of the Financial Times Group. E-mail: lucia.dore@mergermarket.com