Lately, sentiment among major business groups in Pakistan has been improving, as evidenced by their keen interest in mergers and acquisitions (M&A) of businesses available for sale. The financial system has ample liquidity, and business families are actively pursuing deals. This surge in asset acquisition is a positive sign for an economy stuck in a low-growth trap.
Several companies in the cement, pharmaceutical, airline, and food value chain sectors are up for sale, including Rafhan Maize, Attock Cement, Barrett Hodgson, and Pakistan International Airlines (PIA).
Creating new assets in Pakistan is challenging, making it more cost-effective to acquire existing businesses. Additionally, some sectors face high barriers to entry, while others enjoy monopolistic advantages.
Many business groups have deleveraged their balance sheets and are sitting on cash reserves. Their existing businesses often have excess capacity, and new government policies—such as tariff changes—could impact their traditional operations, prompting them to diversify.
Interestingly, these groups are prioritizing investments in manufacturing businesses over real estate, which is encouraging. However, investing in greenfield projects in Pakistan is fraught with challenges due to inconsistent energy and taxation policies. Furthermore, importing plant and machinery for new projects often requires external financing, as the State Bank of Pakistan (SBP) imposes restrictions amid a precarious balance-of-payments situation.
The private sector has both the capacity and willingness to invest, driven by a desire to diversify due to uncertain growth prospects in their existing business lines. For instance, one northern automobile player—seeing its market share decline—is seeking to acquire new assets to bolster its portfolio. Another group aims to establish a new business line for family members.
Recently, a significant transaction set the M&A momentum in motion: Engro acquired 10,500 telecom towers owned and managed by Jazz in a $560 million deal. Jazz aims to focus on its core business, while tower sharing is better suited to third-party operators. M&A momentum is building, with a robust pipeline of deals bringing fresh energy to Pakistan’s private sector. However, such transactions often involve a change of ownership without creating new capacity or expansion. Nonetheless, they boost investor confidence and sentiment.
To gauge interest, this writer spoke to two prominent business groups—one from Lahore and one from Karachi—whose responses varied. Ali Tabba of the Lucky Group expressed frustration with the current environment. He has worked diligently on acquiring PIA but is losing interest due to inconsistent and ad hoc policies. “There’s no continuity or consistency in policies, which leaves little rationale for investing in manufacturing businesses in Pakistan,” he lamented.
He believes the services sector holds more growth potential and suggested that investing abroad may be preferable. “We are already diversified; those looking to buy are seeking to diversify from a single income source,” he concluded.
In contrast, Mian Mansha from Lahore is optimistic. “We are eyeing Rafhan Maize to replace our declining IPP businesses,” he said. He is also keen on acquiring one of two insurance companies the government plans to privatize, noting, “I have an international insurance player as a partner.” Mansha has a strong appetite for government assets, including airports and power distribution companies (Discos), particularly in Punjab.
However, he doubts the political will to privatize, stating, “The roadblock for privatization isn’t workers but parliamentarians who have placed loyalists in state-owned entities and will resist selling valuable assets.”
With the stock market at an all-time high, company valuations are improving, making it an opportune time for the government to expedite privatization efforts. Valuations are favourable, and cash is abundant. The momentum is building, and the opportunity should not be missed.
Copyright Business Recorder, 2025
Ali Khizar is the Director of Research at Business Recorder. His Twitter handle is @AliKhizar