IPOs can also play critical role in succession planning for family-run companies
Written by Ahmed Al Qassim
The strong performance of Al Ansari Financial Services, following its recent listing, highlights the fact that the time for family businesses to launch initial public offerings (IPOs) has never been better. Equity benchmarks in the UAE and Saudi Arabia have been among the world’s best performers as regulatory reforms and a spate of IPOs enhance market liquidity, diversify options for investors and attract new types of issuers.
The recent share sale by Al Ansari marks the first public sale of its kind on the Dubai Financial Market and will pave the way for other family businesses to support their next phase of growth. The demand for Al Ansari’s IPO exceeded Dh12.7 billion ($3.45 billion), about 22 times the number of shares on offer, highlighting the brand awareness and local investor following such home-grown champions enjoy.
The enthusiasm from regional and high-profile international investors for the 57-year-old integrated financial group during the IPO and its post-listing performance is testament to the demand that such high-quality family businesses can expect.
In the wake of the Al Ansari IPO, family businesses are increasingly appreciating the benefits of listing. Going public can be an effective way to transform family businesses into more institutionalised entities and the strong framework that comes with being a publicly traded company helps to build trust with stakeholders.
IPOs can also play a critical role in succession planning for family businesses. By going public, family businesses can gain access to capital to fund their expansion and support the smooth transfer of ownership from one generation to the next. Family members who wish to exit the business can sell their shares on the public market, which can help to mitigate conflict and enable a smooth transition of ownership.
Listed companies also attract a wider pool of talent, including experienced executives who can help to manage the business during a transition period.
The listing of a family business is a powerful tool to drive business growth as it becomes more focused on enhancing shareholder value. The capital raised through IPOs can be used to invest in research and development, expand operations and enter new markets. And in their quest to add more value, new avenues of funding are opened for these businesses, often at much better rates than would be secured as a private company.
Engaging early with a financial adviser can help a family business to evaluate its financial performance and identify areas that need improvement before going public. This can include optimising the capital structure, improving financial reporting and governance, finding cornerstone investors and addressing relevant legal and regulatory compliance matters.
When to go public is an important question. It is never wise to try to “time” the market. The path to an IPO will typically take up to a year for businesses, meaning market conditions may have changed considerably by the time they come to list. Instead, family businesses interested in listing should remain firmly focused on the long-term benefits.
Despite the global market volatility, the pipeline for family business listings remains robust and we continue to receive expressions of interest from clients to begin their capital markets journey. This is great news as deeper capital markets will support the expansion plans of our nation’s fast-growing companies while contributing to the long-term sustainable growth of the UAE economy.
Ahmed Al Qassim is Group Head of Wholesale Banking at Emirates NBD
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