Middle East IPO value falls, but expected to pick up in H2 2018: Baker McKenzie

Region`s IPO activity slows, geopolitics weigh on IPOs, but cross-border deals jump, says law firm

Political concerns and market volatility have once again dampened the IPO market in the first half of 2018, mainly as a result of lower capital raising in Asia Pacific and Europe, the Middle East and Africa. A total of 676 listings have taken place thus far in H1 2018, down 19% on the comparable period last year. The value of listings globally has also fallen 15% to $90 bn, with capital raising in the Middle East falling 70% compared to the same period last year.
Worries around geopolitics—in particular US President Trump's protectionist policies, as well as a lack of progress around Brexit negotiations and prolonged political uncertainty in Italy—weighed on investors' minds and dented the headline numbers. Market volatility peaked early in the year to levels not seen in 2017, adding to the challenge of finding the right time to launch an IPO.
However, cross-border IPOs significantly outperformed.
Concerning the Middle East, the firm stated that the overall (domestic and cross-border) IPO activity in the Middle East has gone off to a slow start, with capital raising amounting to only $ 263m (a decrease of 70% year-over-year from six IPOs (a decrease of 54% y-o-y) in H1 2018, compared to $ 872m from 13 deals in H1 2017 and $ 639m from three deals in H1 2016.
The report explained that in 2017, the total number of listings by Middle Eastern issuers more than tripled, followed by a general improvement in market conditions and investor confidence in the region.
"Despite the slow start in H1 2018, IPO activity is expected to start to pick up in the second half of the year as a result of the privatization drive in the region, which will lead to the listing of government and quasi-government enterprises," according to the firm.
“While the number of IPO transactions during the first half of this year was lower than expected, we still believe that appetite is there, particularly in Saudi Arabia and the UAE,” said Mohammad Al Rasheed, a Capital Markets/M&A partner at Baker McKenzie associated firm in Saudi Arabia, adding, "the IPO pipeline includes a number of transactions that aim to hit the market later this year, although it is likely that some of these transactions will spill into Q1 of 2019."
Baker McKenzie was founded in 1949, it is a multinational law firm that helps its clients to overcome the challenges of competing in the global economy, solving complex legal problems across borders and practice areas.