Deal values fell to $31.7 billion last year compared with $44.1 billion a year earlier, but the number of deals rose 4 percent to 416 from 401 over the same period, a statement said.
The United Arab Emirates took the lead with 49 deals followed by Saudi Arabia's 44.
A larger number of deals at smaller valuations signifies that asset values across the region have taken a tumble in light of lower regional economic growth and also projections for future growth, said Phil Gandier, regional head of transactions advisory services at Ernst & Young.
Analysts polled by Reuters in December expected Saudi economic growth to slow to 4.0 percent in 2012 from about 6.7 percent in 2011.
A valuation gap between buyers and sellers is slowing deal closures, Gandier said, adding sellers have acknowledged future cash flows from business stakes will not be strong and are re-evaluating their options.
These numbers indicate that 2012 will be favorable to buyers if they can add substantial value, said Gandier.
In terms of volumes, domestic transactions outnumbered inbound and outbound deals, as they constituted about 54 percent of total announced deals last year.
But in value terms, outbound deals were higher, accounting for $16.3 billion or 51 percent of the total.
A drop in inbound deals directly correlates with the decreasing levels of foreign direct investment the region is able to attract. This was to a large extent driven by the uncertainty caused by the changes in the region, added Gandier.
The outlook should improve in the latter half of 2012 as global investors return to the region to boost their emerging-market exposure, he said.
Diversified industrial products accounted for 37 deals worth about $680 million, and real estate accounted for 28 deals worth $3.6 billion.
Sovereign-wealth funds accounted for 11 percent of deals.
(Reporting by Stanley Carvalho; Editing by Matt Smith)