As the financial landscape in the Gulf Cooperation Council (GCC) region continues to evolve, the path to liquidity remains a focal point for businesses and investors alike. From Initial Public Offerings (IPOs) to Mergers and Acquisitions (M&A), and the growing prominence of secondary markets, the avenues toward achieving liquidity are numerous and strategically vital.
Key Facts about Liquidity Pathways in the GCC
- Surge in IPO Activity: The GCC has experienced a remarkable uptick in IPOs over the past few years. A report by Ernst & Young highlights that IPO activity in the GCC more than doubled in the first half of 2021 compared to the previous year. This surge underscores the increasing confidence of companies in the regional markets and their desire to tap into public capital.
A prime example of this trend is Jahez, Saudi Arabia’s leading online food delivery platform. Founded in 2016, Jahez capitalized on the rising demand for online delivery services, especially during the pandemic. In December 2021, Jahez announced its IPO on the Nomu Parallel Market, becoming one of the first tech startups in Saudi Arabia to go public. This successful IPO highlighted investors’ growing confidence in regional tech startups and marked a significant milestone for the GCC’s business landscape. Jahez’s IPO story exemplifies how local companies are leveraging public markets to fuel expansion and innovation, contributing to the region’s economic diversification efforts.
- Robust M&A Transactions: Mergers and Acquisitions remain a cornerstone of corporate strategy in the GCC. According to PwC, the value of M&A deals in the GCC rose by 13% in 2020, reaching $55 billion. This increase indicates a thriving market for corporate consolidations and strategic alliances aimed at enhancing liquidity.
A notable example of this trend is the acquisition of Carriage, a Kuwait-based food delivery startup. Established in 2016, Carriage swiftly gained popularity in the regional food delivery market. In 2017, the company was acquired by Delivery Hero, a global leader in online food delivery, demonstrating the robust M&A activity in the GCC. This acquisition not only provided Carriage with the necessary resources to expand its market presence but also highlighted the GCC’s attractiveness for strategic corporate investments. Carriage’s acquisition story underscores how M&A deals are fostering corporate growth and enhancing market liquidity in the region.
- Development of Secondary Markets: The GCC is witnessing significant growth in secondary markets, especially for private equity and venture capital assets. These markets allow investors to trade pre-existing shares, offering an alternative liquidity avenue without the need for a public offering or acquisition.
A prime example of this trend is Careem, the renowned ride-hailing service based in Dubai. Founded in 2012, Careem rapidly became one of the most successful startups in the MENA region, eventually being acquired by Uber in 2019 for $3.1 billion. However, before its acquisition, Careem utilized secondary market transactions to manage liquidity and allow early investors to exit.
Secondary market platforms enabled the trading of Careem shares, providing liquidity options for shareholders and attracting new investors to support its ambitious growth plans. This approach allowed Careem to scale operations and expand its services across the region.
Similarly, another transformative example highlighting the significance of liquidity events in the GCC is the Initial Public Offering (IPO) of Saudi Aramco. This landmark event provides valuable insights into the region’s financial dynamics and the strategic importance of accessing public markets.
Saudi Aramco’s IPO in December 2019 was part of Saudi Arabia’s Vision 2030 initiative, aimed at diversifying the economy and reducing its reliance on oil revenues. By offering 1.5% of the company’s shares to the public, the IPO sought to raise approximately $25.6 billion, making it the largest IPO in history at the time. Extensive preparation went into ensuring the success of this monumental event, highlighting the importance of strategic planning in liquidity pathways.
The IPO garnered massive interest from both regional and global investors. On its first day of trading, Aramco’s share price surged, propelling the company’s valuation to $1.88 trillion and surpassing the $2 trillion mark shortly thereafter. This tremendous market reception underscored the confidence in the company’s future prospects and its critical role in the economy.
The successful IPO had significant implications for liquidity and the broader market. For existing shareholders, including the Saudi government, the IPO provided a substantial liquidity event, enabling the allocation of raised capital toward other sectors as part of the Vision 2030 initiative.
The path to liquidity in the GCC is multifaceted, involving IPOs, M&A, secondary markets, and the vital role of exchanges. The Saudi Aramco IPO is a testament to the region’s potential for landmark liquidity events, underpinned by strategic planning, market confidence, and robust execution. As the GCC continues to develop its financial markets, these paths to liquidity will play a pivotal role in shaping its economic future. With deliberate effort and strategic foresight, the region can ensure that its financial platforms serve as bridges to broader economic prosperity, both locally and globally.
