2022 was a challenging year for equity capital markets transactions globally. Adverse macroeconomic conditions including high inflation, the looming risk of recession, interest rate uncertainty and geopolitical matters including the war in Ukraine caused a significant fall in ECM deal volumes. The IPO market effectively closed in the UK, Europe and the U.S. after having a record year in 2021. 

These trends have continued in Q1 2023. Deal volumes continue to be depressed because of the macroeconomic climate. Any revival has been hindered by the state of the banking and financial services sectors in the U.S. and Europe, as well as the collapse of Silicon Valley Bank and its attendant fallout.  

There have been a few bright spots, including the continuation of a very busy IPO market in the Middle East comprising a mix of privatisations of government owned assets and private (including family owned) enterprises coming to market. We expect this trend to continue into 2023. 

We have also seen a recent trend of companies that are preparing for capital raisings in a number of markets in Europe and the UK, including IPOs and secondaries, in H2 2023 and H1 2024 should market conditions improve. Regulators in EMEA are considering various changes to facilitate IPOs and capital markets transactions, and we expect the implementation of some of these changes this year.

Time to prepare

With the next upward trend in IPOs, investors will be concentrating on the quality of companies on the market. To be able to take advantage of windows of opportunity and market improvements, early preparation is key. 

Given it can take six months to prepare for an IPO, companies considering a listing should ensure that they are as well prepared as they can be. Not only with their business plans, but also collaborating with their internal teams and external advisors to define creative execution strategies that will attract investors and facilitate transactions.

We expect to see further secondary equity issuance activity by businesses operating in a variety of industries across EMEA. This will serve a variety of capital needs, including funding M&A and repairing balance sheets. 

We remain cautiously optimistic for deals in the second half of 2023 and beyond. We are excited to be working with a pipeline of exciting and expanding companies.

If you have any enquiries or would like to discuss any matters of interest, please don’t hesitate to contact the Allen & Overy ECM deals team.

Middle East

ECM activity in the GCC region (particularly the UAE and Saudi Arabia) has been at an all-time high. Increasing energy prices, strong economic growth and an increased government focus on diversifying their economies and attracting foreign investment have spurred investor confidence, which has resulted in a strong regional IPO market. 

Allen & Overy’s ECM practice in the Middle East advised on a number of high profile and significant ECM transactions throughout 2022; our team advised on more UAE IPOs than any other international law firm. 

These included the IPOs of Americana (ADX and Tadawul listing), Empower (DFM listing), Borouge (ADX listing), ADC Acquisition Corporation PJSC (ADX listing), TECOM Group (DFM listing) and Burjeel Holdings (ADX listing). 

There were also some market firsts. The A&O team advised ADC Acquisition Corporation PJSC on the first ever SPAC to be listed in the GCC. We also advised on the IPO and listing of Americana Restaurants International PLC, which was the first-ever concurrent dual listing on the UAE and Saudi Stock Exchanges. This deal won A&O the recent Capital Markets Legal Adviser of the Year award at the Capital Markets & ESG Finance Saudi Arabia Awards 2023.

We expect 2023 will be another strong year of IPOs in the Middle East. In Q1 2023, we have already seen the IPOs and listings of ADNOC Gas (ADX) – the largest IPO in the world to date in 2023 – and Abraj Energy Services (listing on the Muscat Stock Exchange, the largest IPO ever in the Sultanate of Oman) – both deals A&O advised on. We expect a strong pipeline of deals from a diverse sector group coming to the GCC public markets, comprising a continuation of government spin-offs, government assets and family owned businesses.

This significant interest in GCC IPOs (many of which were heavily oversubscribed) reflects the deep confidence of the regional and international investor community in the region’s long-term growth prospects and critical infrastructure. It also underlines, in particular, the UAE’s position as a thriving and dynamic international financial centre with real depth.

EMEA

Across EMEA, the extent and speed of planned capital markets reforms is likely to influence future activity. Those include legislative changes including the UK’s Primary Markets Effectiveness, Secondary Capital Raising and Prospectus Regime reviews and the EU’s Listing Act. Other key developments to be mindful of include ESG and gender diversity reporting, setting sustainable financing standards, and tax policy. 

Even though the European market has been sluggish, there is a healthy pipeline of companies interested in IPOs. Higher interest rates will make equity a more attractive funding option for many of them. Businesses with robust fundamentals, the scope to scale and strong leadership teams, and who have managed to be profitable despite the turbulence in recent years, will be attractive to investors when market conditions improve.