JEDDAH: Challenging markets may come and go, but companies that outperform the overall market prepare early for their initial public offering (IPO), according to Phil Gandier, Riyadh-based partner, transaction advisory services, Ernst & Young ME.
“Businesses need to undergo many months of advanced planning, organization and teamwork before they are ready to go public. When the market timing is right, it’s the companies that are fully prepared that are best able to leverage the windows of IPO opportunity,” Gandier told Arab News in an interview.
Commenting on Ernst & Young’s “Measures that matter: IPO readiness” report, Gandier said market outperformers treat the IPO as a long-term transformational process which brings change to every aspect of the business, organization and corporate culture. “We call the process of going public, the IPO value journey. The journey to public company status must prepare an organization not only for the defining moment of the IPO event, but also for a whole new phase of corporate life.”
The executive summary of the report analyzes the top 10 IPO readiness challenges from the perspective of C-level executives worldwide who have already experienced success in their value journey. It also contains insights from its survey of global institutional investors, as well as the cumulative experience of Ernst & Young’s global network of IPO advisers.
The surveyed CEOs who led the companies that outperformed the market have highlighted four key themes as their advice for those who wish to go public.
Even in the midst of market turbulence, the list of companies preparing for an offering continues to lengthen. “We look forward to working with these companies, as they prepare for their transformation from a private entity to a public enterprise,” he added.
In fact, he said IPO activity in the Middle East has declined noticeably in the last few months mirroring the investor sentiment and the global economic downturn.
Regional IPOs in October-November 2008 raised a total of $22.4 million from three IPOs compared to $6 billion raised from 10 IPOs in the same period last year.
During 2008, Saudi Arabia, the UAE and Egypt were the top three markets in terms of capital raised accounting for 78 percent, 10.3 percent and 4.7 percent, respectively.
“Though the $13.4 billion raised through 55 IPOs during January-November this year was 4.6 percent higher than the $12.8 billion raised in all of last year, the drop in activity in the last two months is the result of current investor sentiment and the effect of the global financial crisis on regional markets.
Global IPO activity has more than halved since 2007. During the first 11 months of 2008, a total of 745 IPOs worldwide raised $95.3 billion in capital. This compares with 1,790 IPOs over the same period in 2007, which raised $256.9 billion in capital.
IPO activity has also fallen in emerging markets. BRIC (Brazil, Russia, India, China) markets recorded 163 IPOs raising $28.0 billion in capital in the first 11 months of 2008 compared to $106.8 billion from 365 IPOs in the same period in 2007.
Asian IPOs have generated the most capital this year to date ($29.7 billion). By number the most active regions are Asia (337 IPOs), Europe (161) and North America (91).
Globally, the top three IPOs by capital raised were Visa Inc, the largest US IPO in history, which raised $19.7 billion; China Railway Construction Corp Ltd. ($5.7 billion); and the Brazilian energy company OGX Petroleo e Gas Participacoes SA ($4.1billion).
