Middle East initial public offerings may increase as tightly-controlled family businesses tap capital markets for growth in the next couple of years, Tarek Elrefai, BNY Mellon’s senior executive in Dubai said.
“Organic growth is not enough any more,” Elrefai, head of BNY Mellon’s Global Client Management for the Middle East and Africa, said in an interview yesterday in Dubai. “They are looking to double, triple in five years. When you have this ambitious plan to double or triple your revenue in five years, organic growth is not enough. You need to go for an IPO.”
Arab uprisings that ousted leaders in Egypt and Tunisia and Europe’s debt crisis slowed regional share sales in recent years. Money raised from IPOs in the Middle East and North Africa reached $2 billion in 2012, according to Ernst & Young International. In 2008, IPOs worth more than $80 billion were announced, according to data compiled by Bloomberg. Regional stock markets are recovering, with Dubai’s DFM General Index rising 16 percent in January, the best ever start to a year.
The IPO pipeline has been limited as privately held businesses including Al Habtoor Group LLC, a Dubai-based group controlled by billionaire Khalaf Al Habtoor, await a revival in volume on regional stock markets. Between 75 percent and 90 percent of Middle Eastern companies are owned and run by families, according to the Dubai-based Tharawat Family Business (KAPFMBE) Forum, an independent network of Arab family businesses.
Gulf Craft LLC, a U.A.E. builder of motorboats and yachts, may sell shares in two to three years as the nation’s equity markets recover, Chief Operating Officer Erwin Bamps said yesterday. The firm is owned by the Al Shaali family.
“We get interest from families asking about initial public offerings but not request for proposals,” Elrefai said. “We see business coming. We are patient. They’re not taking the decision but we understand the decision will be coming because we lived it before.”
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