The Middle East has become one of the busiest regions for initial public offerings in recent years, a market so far dominated by state-backed and family-run businesses. Bankers now see a new opportunity emerging: private equity-backed listings.
Barclays Plc and Emirates NBD Capital are positioning for the Gulf’s evolution into a credible exit market for private equity sponsors, underpinned by about $50 billion in initial share sales since 2022, a widening mix of sectors going public and deeper institutional and international participation. This would also come as a potential boon to an industry that has in recent years struggled to return money to investors.
“There are now more discussions happening with a broader range of owners who see the region, especially the United Arab Emirates, as a viable listing destination,” said Nikita Turkin, head of Central and Eastern Europe, Middle East and Africa equity capital markets at Barclays. “While the number of private equity-owned businesses here is still smaller than in more mature markets, activity has clearly increased.”
Hitesh Asarpota, chief executive of Emirates NBD Capital, said the bank has also held early talks on potential private equity exits in industries including food and beverage, retail, health care and services.
A test case may come soon. Online classifieds group Dubizzle Ltd., where Bain Capital and Kingsway Capital Partners are seeking to sell their stakes, opens to investors this week. Kingsway is also considering a listing of hookah maker Advanced Inhalation Rituals, Bloomberg News has reported.
A growing number of buyout firms have been moving into the Middle East to be closer to sovereign wealth funds, which control over $4 trillion, and deal flow. Brookfield Asset Management Ltd. has led major investments in GEMS Education and Network International Holdings Ltd.; Permira, Blackstone Inc., CVC Capital Partners and Ardian SAS have also stepped up their regional activity.
Buyout funds globally have come under pressure to exit assets after struggling to return capital to investors amid higher borrowing costs. In May, the head of Kuwait’s $1 trillion wealth fund said “private equity is very troubled,” echoing concerns about the industry’s valuation practices.
In the Middle East, exits through listings would face their own set of challenges.
“I don’t see a big wave of large PE-backed IPOs in the next 12 to 18 months,” Asarpota said, nothing that wealth funds and family offices provide alternative exit routes. The growing private equity base also makes secondary sales to peers often easier than going public, he added.
Limited liquidity is another constraint. While follow-on offerings are becoming more common, volumes remain well below those of developed markets.
“When a fund owns 50% to 75%, and a local listing typically ends up with a 20% to 30% float, they will also need to look at the viability of structured exit options” such as accelerated book-builds, said Asarpota.
Initiatives such as the Dubai Financial Market’s Arena platform, Abu Dhabi’s Growth Market and Saudi Arabia’s Nomu are intended to help smaller and mid-sized companies test public markets. Aligning local listing rules more closely with international standards - for example, allowing greater flexibility for small capital raises without extensive regulatory approvals - would also make markets more dynamic, Turkin said.
Encouraging broader foreign participation could also help.
“International investors tend to bring more valuation discipline,” Turkin said. “Private equity sellers are typically more valuation-sensitive than state entities, so managing expectations will be key.”