UAE family businesses are increasingly embracing IPO readiness, and the Abu Dhabi IPO Programme is witnessing notable traction in the markets.
John Lawless, Head of Investments and Institutional Client Coverage at Abu Dhabi IPO Programme, anticipates a surge in family offices initiating the IPO readiness process in the upcoming year. He stated, “We have already collaborated with several family offices concerning the IPO readiness process, and we anticipate a significant rise in participation next year.”
In an exclusive interview with Finance Middle East, Lawless highlighted the logical progression aligning with generational transitions within family businesses. “It represents a significant opportunity for families to capitalise and enhance value across various segments of their businesses while addressing governance and succession planning,” he explained.
Abu Dhabi IPO Programme is a Dh5 billion fund. Its purpose is to enable companies to transform from privately held companies to reach the ADX and be publicly listed.
The Programme seeks to invest in 5 to 10 private sector companies annually, focusing on small and medium-sized companies (SMEs), by targeting between 10% and 40% of the total shares available for subscription, in addition to working closely with various local banks.
Abu Dhabi IPO Programme disclosed plans to introduce three IPOs by the end of 2024, including one in the financial sector.
Lawless believes that with the burgeoning equity capital markets in the UAE, family businesses are inclined to tap into this alternative capital pool to generate value. “We are expecting a lot more traction,” he confirmed. “There is existing interest and traction, which we expect to amplify over time.”
IPO readiness encompasses comprehensive business preparation, including market framing, financial trend modelling, risk assessment, cybersecurity evaluation, corporate structure analysis, and potential governance frameworks, among other aspects.
“IPO readiness is a journey, not something that can take place overnight,” Lawless emphasised. “Work that begins today might not be completed from an IPO readiness and listing perspective for maybe 48 months from now.”
“So I wouldn’t expect an avalanche of family offices to come to market next year. However, we are seeing many more family offices strategising and planning for listings in 2024, 2025, and 2026,” Lawless added. “There will be increased engagement and strategic planning for market entry in the coming years.”
Al Ansari Financial Services was the UAE’s first family-owned company to be listed, raising $210.4 million in proceeds.
Dynamic 2023
The surge in offerings in the Gulf coincides with an 8% rally in the MSCI GCC Countries Index since late October. Bloomberg data indicates that Middle Eastern IPOs have raised approximately $8.4 billion this year, marking a 54% decrease from the previous year’s exceptionally high levels. However, almost all 12 listings raising over $100 million have seen an increase in their offer prices.
“We’ve been actively engaged in IPO activities this year, and we anticipate this momentum to continue into the next year,” Lawless noted.
“We are constantly in discussions with financial institutions, banks, and issuers,” he added. “We foresee a robust pipeline for next year and expect a highly active year ahead.”
The resilience factor
Regarding the impetus behind this momentum, Lawless described it as a natural evolution in capital markets or any emerging markets.
“We’ve witnessed the shift from bank financing to debt capital markets, and now we’re naturally progressing toward vibrant equity capital markets,” he explained. “We have formidable companies here, both private and government-affiliated, that have reached a stage in their development where they are poised to enter the market.”
“We boast a buoyant investor appetite and a strong local investor base,” Lawless added.
He emphasised the UAE’s robust local investor base and the support from government-related and institutional investors, offering ample growth capital for companies aiming to expand. The local investor segment backs 80% of an IPO’s order book.
Lawless stressed Abu Dhabi’s capacity to harness these dynamics effectively. “Many portfolio companies, after traversing private and public rounds, have reached a stage where entering the product markets makes sense,” he stated. “This shift will likely alter the composition and dynamics of the listed firms.”
He anticipates that listings such as Phoenix, Presight, and Bayanat, with their non-traditional strategies focusing on high-tech and AI, will enhance sector diversity. Lawless predicts this will translate into greater liquidity, leading to other players coming in from a financial investment perspective.
He expressed hope for more synthetic investing, which can augment market liquidity.
