Economic prosperity in the region has seen many companies grow to levels exceeding the minimum requirements to launch an Initial Public Offering (IPO). A recent report from KPMG Middle East revealed that 80% of companies surveyed would do things differently if they were to go through an IPO again, highlighting key challenges to be avoided by regional companies considering going public.
“The survey suggests that the main reasons for floating include improved business efficiency, raising startup capital, and increased profile,” commented Ashish Dave, Head of Private Equity, KPMG in the Middle East and South Asia. “Yet the extent of company resources required for a successful IPO process is often underestimated. 12% of CEOs and 24% of CFOs spent more than half of their time on the IPO process, and more than a third of companies experienced delays in the planned timetable. However, all companies surveyed believed their IPO met their objectives. Nearly half consider the main difference as a listed company to be increased profile and credibility.”
A company with minimum paid up capital of AED 20 million can apply to list locally, and an IPO can be a rewarding but challenging initiative. The advantages can include increased profile, exit routes for shareholders, and capital injections for expansion. However, the advantages come at a cost, and listed companies are subjected to increased regulatory requirements and public scrutiny. KPMG in the United Arab Emirates (UAE) and Oman conducted the survey of companies listed on the Abu Dhabi Securities Market (ADSM), Dubai Financial Market (DFM), and the Muscat Securities Market (MSM) to understand the challenges faced by companies undertaking an IPO in the UAE and Oman.
KPMG presented the results of the survey at a conference in Dubai. The survey found that key challenges included preparation and verification of the prospectus, conducting due diligence, and coordinating with numerous advisers. The main reasons given for going public were improving business efficiency and raising additional start-up capital. Only 12 percent cited an exit route for shareholders as the primary reason; a surprising result, given the large number of second and third generation family-owned businesses in the region.
Dale Gregory, Senior Manager with Transaction Services, KPMG in the UAE and Oman, commented “Our experience, and that of our clients and the companies surveyed, is that an IPO is a journey, rather than a one-off event. Even after the months of hard work involved in planning, positioning the company, due diligence and then marketing the offering, the management of a listed company has to face up to the additional burden of increased reporting and public scrutiny required by the markets. The results of this survey can help companies currently considering an IPO to learn from the experiences of those that have gone before them.”
To date, approximately 117 companies have listed on securities markets in the UAE, including the Dubai International Financial Exchange (DIFX), which only lists international companies.
FURTHER FINDINGS OF THE REPORT:
• Preparatory work is required to meet regulatory requirements: 24% noted that a great deal or fair amount of work was required, 24% claimed no work was required.
• Often, the amount of time it takes to list is underestimated - one-third of companies experienced delays in the planned timetable. Main reasons included: changes in market conditions, government approval, availability of manager/broker, complexity of preparing track record, unrealistic timetable, and resolving issues uncovered in due diligence. Companies backed by private equity are most likely to complete the process on time.
About KPMG
KPMG is a global network of professional firm providing Audit, Tax, and Advisory services. We operate in 148 countries with more than 6,800 partners and 113,000 professionals working in member firms around the world.
The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.
KPMG in the UAE
KPMG in the UAE is a member firm affiliated with KPMG International. The offices were established in 1973 and now consist of about 400 staff members. In addition to providing Audit and Accounting services, the nature of work performed by the UAE offices of KPMG includes Internal Audit, Accounting Advisory, Tax, Information Risk Management, Executive Search & Selection, Corporate Finance, Transaction Services, Business Process Outsourcing and Forensic services.
KPMG is widely represented in the Middle East region and has offices in the UAE (Dubai, Abu Dhabi, Jebel Ali, Fujairah, Sharjah), Bahrain, Egypt, Iran, Kuwait, Lebanon, Oman, Qatar, The Kingdom of Saudi Arabia, Syria, and Yemen.
KPMG’s Advisory Services practice can provide a wide range of Initial Public Offering (IPO) services, from pre-listing to post-listing requirements. We are part of a global network of over 1,600 transaction professionals focused on IPOs, M&A transactions, acquisitions, disposals, mergers, joint ventures, leveraged buyouts (LBOs), supported by the professional skills and experience of KPMG member firms in 148 countries.
In addition, the practice provides a range of independent investment banking services, strategic advisory services and deal management services covering: acquisitions and disposals; mergers and takeovers; valuations and fairness opinions; structured and leveraged financing; private equity strategies; initial and secondary public offerings; joint ventures and transaction alliances.
