Global IPO volume hits 10-year high; active 2017 for IPOs in the Middle East: Baker McKenzie Report
- 2017 total global IPO activity: USD 206.6 billion raised and 1,694 listings - up 44% and 31% from 2016
- 315% increase in domestic IPO value from 2016
- Overall IPO activity from the region saw a 225% increase in terms of volume from 2016
- First cross-border listing in the Middle East since 2015
Global IPO volumes in 2017 reached the highest level in a decade, according to the latest Cross-Border IPO Index (as at 4 December 2017)* by global law firm Baker McKenzie. The Middle East region also picked up with 300% increase in value of domestic deals and securing the first cross-border listing in the region since 2015.
Low market volatility as a result of the relatively benign geopolitical environment and improved market sentiment were behind the increase in global IPO activity, which saw both cross-border and domestic activity grow. In total, 1,694 companies raised USD 206.6 billion from IPOs, a jump of around a third in both value and volume on 2016.
Cross-border deals jumped by 60% in volume, growing in all regions, including Latin America, which saw its first cross-border listing in 10 years. Cross-border capital raising also grew in value in 2017 by 25%, the majority of which was accounted for by a strong performance in Europe, Middle East and Africa (EMEA) and North America. That helped offset a decline in Asia Pacific cross-border capital raising.
The UAE recorded the only cross-border listing in the Middle East region, by ADES International Holding, which raised USD 243.5 million on the London Stock Exchange.
“The economic activity associated with IPOs is vital for the overall development of regional capital markets, which in turn will stimulate further growth in Arab economies,” said Mazen Boustany, Head of Banking & Finance at Baker McKenzie Habib Al Mulla in the UAE.
Middle East domestic IPO activity
On the domestic front, IPO values were up an impressive 55% year on year, from USD 676 million to USD 2.1 billion in 2017, while volumes also increased by 40%, from four IPOs in 2016 to 12 IPOs in 2017. The number of IPOs this year compared to 2015 climbed by 22%, although capital raised fell by 3%.
Overall IPO activity from the Middle East (both domestic and cross-border) saw a 225% increase in terms of volume and 315% increase in value. The UAE and Saudi Arabia led domestic IPO activity with four listings each, followed by Oman with three and Qatar with one. The UAE had the largest share (64.4%) in terms of capital raising from the region, with proceeds of USD 1.3 billion from its four listings. This value excludes the USD 851 million listing of Abu Dhabi National Oil Company for Distribution PJSC (the biggest listing on the Abu Dhabi Stock Exchange in the past decade), which was only priced on 13 December 2017.
“Stability of oil prices and the political situation will contribute to developing market penetration and enhancing liquidity,” added Zahi Younes, Capital Markets/M&A partner at Baker McKenzie's associated firm in Saudi Arabia. “As per our recent global transactions forecast, strong economic reforms and privatization plans in Saudi Arabia will lead to an increase in investor appetite and are likely to drive IPO activity in 2018.”
The top sectors by volume for domestic IPOs in the region in 2017 were Financials and Energy & Power, with three listings each, and the top sector by value was the Real Estate sector, with more than USD 1.2 billion raised from one listing.
It proved a steady year for capital raising in Asia Pacific’s exchanges during 2017, with issuance totalling USD 92.4 billion accounting for a 13% increase compared to 2016. The Cross-Border IPO Index in Asia Pacific fell by 20% in 2017, as domestic deals dominated the share of new equity deals in the region and the cross-border capital raised during the year fell 24%.
After a slow start, it has been a buoyant year for IPOs in EMEA in 2017 with both the volume of capital raised and the number of issuances climbing sharply. Total capital raised climbed by 55% to USD 55.1 billion while the number of issues was up 25% to 227, both following two previous years of decline.
The Cross-Border IPO Index in EMEA was one of the most promising increases in 2017, after continuous years of decline. The EMEA index increased by 93% in 2017, as cross-border capital raising and the number of IPOs experienced increases, driven by the largest cross-border lPO this year, Allied Irish Banks.
The North America market rebounded in 2017, shaking off the lethargy which accompanied the US election in 2016. Capital raising jumped by 108% to USD 51.6 billion while the number of issuances increased by 112% to 320.
Cross-border listings increased by 127% to 59, raising a total of USD 9.5 billion, up 46% on the year. Companies based in China were the most active cross-border issuers in North America and made up 25 of the 59.
Capital raising in Latin America in 2017 saw USD 7.6 billion raised, a 781% jump on the previous year. Behind the impressive growth was a surge in domestic capital raising as well as the first cross-border IPO listing in a decade valued at USD 426.3 million by Brazilian healthcare firm Biotoscana Investments SA.
Recovery hopes in two of the largest economies in the region – Argentina and Brazil – elicited strong investor sentiment and growth of IPO was also driven by regulatory changes in Argentina and Brazil designed to unlock economic growth.