- Deloitte: Low number of IPOs in GCC due to stricter regulatory measures and lack of liquidity
21 May, 2013 - With another relatively slow 12 months for actual equity issuances in the GCC, and with Saudi Arabia leading the league table with five listings over US100 million, a number of factors are responsible for the low volume of IPOs, according to experts from Deloitte in the Middle East. These include stricter regulatory scrutiny of companies with plans to list, a lack of liquidity in certain markets, changes in capital raising regulations, and regional unrest in some MENA countries. However one thing is clear, there is a strong pipeline of issuers looking to launch an IPO as soon as the right window of opportunity arises.
“We continue to see successful regional management teams coming to us to discuss their potential IPO options, both in the region and internationally. There is a noticeable increase as compared to last year,” says Declan Hayes, managing director at Deloitte Corporate Finance Limited in the MENA region. “There is an encouraging number of corporates looking to raise equity capital on international stock exchanges, such as London and Singapore, both due to their equity story and the interest that the Middle East region is attracting from both Western and Far Eastern investors,” he added.
Deloitte were advisors to the Board and management on the successful premium listing of NMC Healthcare, an Abu Dhabi based healthcare provider on the London Stock Exchange which raised US180 million and placed NMC in the FTSE 250 rankings. Deloitte's role involved advising and assisting NMC management throughout the pre-listing and listing process to ensure the transition from a private to a publicly listed company took place with the least amount of disruption to the business, and that activities were well coordinated with the Sponsor and other advisors.
“Corporate management teams and private shareholders are recognizing the need to prepare well ahead of a potential listing to increase their chances of maximizing value for shareholders and to avoid major disruption to the day-to-day running of the business,” says Adnan Fazli, director in the capital markets team at Deloitte in the Middle East. “We are actively working with the management teams at a number of clients looking to fast track their internal readiness to list.”
The AsiaCell IPO on the Iraq Stock Exchange which raised US$1.3 billion in January 2013 – the biggest in the Middle East since 2008 – is a validation of the positive impact readiness can have on the speed of clearing regulatory reviews and the valuation achieved.
“Of the corporates we are working with, at least 5 would likely have a market cap of over US$1 billion in a 2015 listing on an international stock exchange while a number of others are likely to be regional issuers on the local stock markets,” according to Hayes. “Whether a business is contemplating a listing on the Tadawul, ADX, Bourse Dubai, MSM or a future SME market (as has been tabled in Doha and Dubai), a company's readiness to list will be the key differentiating factor between those that are first past the finish line when the IPO window opens,” he concludes.