Middle Eastern businesses are increasingly making use of the alternative route to public listing known as SPACs, a report by Ernst & Young has claimed.
The analysis shows a rise in activity involving special purpose acquisition companies (SPACs) and MENA-based firms.
SPACs are publicly listed companies created with the sole purpose of purchasing privately owned businesses, which therefore leads to its target to be listed.
As well as private companies, sovereign wealth funds in the Middle East — including Saudi Arabia’s Public Investment Fund (PIF) and Abu Dhabi’s Mubadala — have also made use of SPACs, with PIF investing USD$75 million in NYSE-listed Compute Health in February.
Gregory Hughes, Ernst & Young MENA IPO and transaction diligence leader, said: “IPO activity during H1 2021 was below expectations, nevertheless the year did bring some remarkable deals with MENA companies showing an ever-increasing interest in SPAC transactions as a means to go public. We expect this trend to continue as companies seek to increase their international presence and gain access to a wider pool of investors.”
Among the MENA companies to go public this year after merging with SPACs were Abu Dhabi-based music streaming platform Anghami, and Dubai-headquartered transit firm Swvl Inc.
While SPAC activity was surging, the proceeds from initial public offerings (IPOs) across the region saw a year-on-year drop of 48 percent in the first half of 2021.
Four IPOs raised USD$425.8 million, even though the number of listings stayed the same as 2020.
Matthew Benson, EY MENA Strategy and Transactions Leader said that despite the drop, his company’s outlook on the region’s IPO activity “remains positive”.
