Businesses in the Middle East and North Africa (MENA) have different options to fund their sustainable growth, speakers at the Sharjah FDI Forum 2019 said.

Experts at the panel titled ‘Raising Funds to Accelerate Corporate Sustainable Growth’ discussed viable funding options like initial public offerings (IPO) and private financing.

IPO is an option for both family businesses and corporates in the UAE, Saeed Mansoor Al Awar, Managing Director, Middle East Region, Rothschild & Co said, adding, the real question is if the business is ready to be listed and if the business cycle is the right one or not.

“IPO is definitely a good route to provide a sustainable avenue to raise funds in the future, and an important aspect of an IPO is corporate governance and sustainability,” Al Awar said.

“If you think about family businesses for a second, governance is definitely a very key aspect. A lot of family businesses that we see obviously go through difficult times because of succession issues,” he said, noting that IPOs provide liquidity and good governance regimes for family businesses.

Venture capital and private equity are other funding options for businesses, as many factors need to go right before an IPO happens.

“A lot of companies opt for private financing on the equities side,” Asar Mashkoor, Managing Director Investment Banking at Emirates NBD Capital said.

A cheaper option than equity financing for companies is debt. As companies try to reach their optimal capital structure, they should aim to have debt at least at its optimal level.

“Depending on what you need you can tap (the) bank market, you can tap the debt capital markets and so on,” Mashkoor said.

For smaller companies and SMEs, especially in the technology sector, there is a whole new breed of venture capital willing to invest in such businesses, said Mashkoor, citing acquisitions of Careem by Uber and Souq.com by Amazon as examples.

Fahima Abdul Razzaq Al Bastaki, Executive Vice President, Head of Business Development at Dubai Financial Market (DFM) revealed that when DFM started the IPO programme in 2009, they had targeted 40 companies, majority of which were family businesses, for listing.

Many of these companies could not float IPOs as they were just not ready for it, she said.

“Corporate governance was an issue. Which is why DFM is building on the sustainable development plan, as envisioned by the wise UAE leadership,” she said.

“We have been working with a lot of family businesses. Some of the regulations have been changed to cater to family businesses through the 2016 amendments to the company law regarding equity state and stock options. We expect the listings to increase in (the) future,” she added.

(Reporting by Gerard Aoun, editing by Seban Scaria)

(gerard.aoun@refinitiv.com)

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