IPOs backed by private equity funds are gaining momentum in the Gulf

In recent years, the Middle East has become one of the most active regions in the world for initial public offerings, a market that until now has been dominated by state-backed companies and family businesses. However, bankers now see a new opportunity on the horizon: offerings backed by private equity funds. Both Barclays and Emirates NBD Capital seek to take advantage of the transformation of Gulf markets into a reliable market for exits by private equity funds, supported by initial offerings worth around $50 billion since 2022, and an increasing diversity in listed sectors, in addition to broader participation from institutional and international investors. This shift represents a potential opportunity for an industry that has struggled to return money to investors in recent years. Also Read: Growing Demands for Gulf IPOs Amid Efforts to Diversify Economies. Nikita Turkin, head of equity capital markets in Eastern and Central Europe, the Middle East and Africa at Barclays, said: “There are now broader discussions with a diverse group of owners who see the region, particularly the UAE, as a viable destination for stock exchange listing.” He added: “Although the number of companies owned by private equity funds in the region is still lower than in mature markets, activity is clearly increasing.” Sectors targeted: Emirates NBD Capital CEO Hitesh Asarputa, for his part, said the bank was in early discussions about exiting private equity funds from their investments in sectors including food and beverage, retail, healthcare and services. But one widely watched case highlights the challenges facing exits through public offering in the Middle East. Online classifieds company Dubizzle postponed its IPO just one day before book-building began in Dubai, disrupting plans by Bain Capital and Kingsway Capital Partners to sell their stakes. The reasons for this delay were not immediately clear. Liquidity problems: Limited liquidity remains one of the obstacles. Despite the increase in secondary offerings, trading volumes are still below the levels of developed markets. Also Read: Investor appetite for Saudi IPOs continues to strengthen as IPO momentum returns. Asrbotta said: “When funds own between 50% and 75% of the company, and the local listing is usually with a free float ratio of shares ranging between 20% and 30%, they will have to consider the feasibility of structured exit options, such as accelerated building of the order book (accelerated). “I do not see a large wave of IPOs by private equity funds within 12 to 18 months backed up,” he added and noted that sovereign funds and family offices offer potential exit alternatives. Gulf Sovereign Funds: The number of global sourcing companies moving their operations to the Middle East is increasing, in an effort to improve their proximity to sovereign funds managing more than $4 trillion and to the path of deal flow. Brookfield Asset Management has significant investments in led GEMS Education and Network International, and also employed companies such as Permira, Blackstone and CVC Capital Partners. Capital Partners and Ardian, its regional activity. Also read: Private equity fund returns fall to their lowest level in 15 years. Buyout funds around the world are facing increasing pressure to exit their investments after struggling to raise capital to return to investors, amid a rise in borrowing costs. Last May, the head of Kuwait’s sovereign wealth fund, whose assets are estimated at nearly $1 trillion, said: “Private equity faces deep problems,” citing concerns related to valuation methods in this sector. Golf initiatives to facilitate listing Initiatives such as the However, “Arena” platform in the Dubai Financial Market, the “Nomu” market in Abu Dhabi and the “Nomu” market in Saudi Arabia can allow small and medium-sized companies to test public markets. Turkin believes that aligning local listing rules with international standards, such as allowing more flexibility to raise small capital without the need for lengthy regulatory approvals, will Making golf markets more dynamic. He also pointed out that encouraging the participation of foreign investors can contribute to improving the discipline of valuations. “International investors tend to enforce higher discipline in valuations,” he said, adding that “sellers of private equity funds are usually more sensitive to the value of the offer than government entities, so managing expectations will be a critical factor.”