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Compared to ecosystems in other areas, the startup scene in the Middle East and North Africa (MENA) region is still in its infancy. The region’s IPO market also has a long way to go, with the MENA region closing more than 50 IPOs. For a quick comparison, India had over 130 IPOs in five years.
Still, the region seems poised for explosive growth. MENA’s digital economy is expected to exceed $500 billion by 2030, accompanied by the growth of more than 300 unicorns and unicorns, according to a RedSer Strategy Consultants report. This will build a strong pipeline for IPOs in a short period of time, he said.
Much of this stems from the rise of new sectors such as healthtech, edtech and fintech in the region’s digital economy, according to Sandeep Ganediwala, managing partner at RedSear.
Regulation and government initiatives in the region will unlock investments and stimulate growth, with future growth coming from backward countries. This is in addition to the growing merger and acquisition activity in the region.
“The IPO market has been booming in recent years, with more companies looking to raise capital from the public market, investors’ enthusiasm and confidence in the region’s economy. Possible incentives. The regulations governing the IPO market in the MENA region differ from country to country, as each country has its own legal and regulatory framework for securities offerings,” says Ganediwala.
Image credit: Chetan Singh
Data credit: RedSeer
Acquisitons and IPO routes
Philippe Bahoshi, CEO and founder of MAGNiTT, believes that more exits and acquisitions will take place this year.
“With a subdued global IPO market and a more urgent need for capital savings…some startups will have little choice but to look for acquisitions or consolidations in 2023 as an alternative to fundraising,” he says.
This gives companies an opportunity to find promising startups from different regions, from international startups to well-capitalized companies, he added.
Considering the initial public offering (IPO) route in the region, the market is dominated by Saudi Arabia and the United Arab Emirates (UAE), which account for the largest share of the total IPO activity in the MENA region. The region has a strong digital landscape with major companies such as Apparel Group, Landmark Group, Al Tayer Group of Companies, Mashreq and Saudi Telecom Company (STC) poised for an IPO in the next seven years.
“More than 30 conglomerates in the MENA region have digital assets ripe for IPO in 2030,” says Akshay Jayaprakasan, Associate Partner, Redseer Middle East.
Ganediwala says how quickly a company can reach the IPO stage depends on a number of factors, including current market conditions, the regulatory environment and the specific characteristics of the company seeking to go public.
Overall, market conditions in the MENA region have been relatively favorable for IPOs recently. This is due to the growing number of institutional investors and increasing interest from international investors seeking opportunities in emerging markets.
“However, despite these positive developments, there are still challenges that companies may face when seeking an IPO in the MENA region. These may include political instability, economic instability and currency fluctuations, which make it difficult to accurately assess a company’s share price and risk.” Ganediwala explains.
The region’s IPO market is small compared to other markets but continues to grow and attract interest from investors and companies. Some notable tech IPOs witnessed in the region include Saudi Arabia’s Jahez in 2022 and Egypt’s Faury in 2019.
Image credit: Chetan Singh
Factors affecting growth
What stands out about MENA is its affluent young population. In the pre-pandemic era, the share of the digital economy in terms of personal consumption in MENA was 5% because the early adopters in the growth stage were mostly tech-savvy, Gen Y and affluent consumers.
This period has seen a huge increase in online grocery, food delivery and other quick business platforms. Governments in the MENA region have introduced regulations on digital payments to promote further adoption.
The digital economy is on track to account for 23% of private consumption in the region, which is growing 4X faster than offline consumer spending.
“With an average age of 26, MENA is home to a digitally ready population with strong logistics infrastructure, making the region fertile ground for digital solutions,” says Ganediwala.
A deliberate and goal-oriented approach is essential for companies to be IPO-ready by gaining the right market leadership, having a clearly visible total addressable market (TAM), focusing on customer passion and a clear profitable path.
The report emphasizes the importance of building good relationships with investors and improving corporate governance for companies heading for an IPO.
Designer Credit: Chetan Singh
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