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Fees and procedures make UAE IPOs more complex 

Traders at Dubai Financial Market - UAE businesses listing an IPO at DFM must have Securities and Commodities Authority approval Alamy via Reuters
Traders at Dubai Financial Market – UAE businesses listing an IPO at DFM must have Securities and Commodities Authority approval
  • Process takes up to a year
  • One-off plus ongoing fees
  • Time cost also demanding

UAE companies seeking to go public must undertake complex and often costly procedures to complete an initial public offering, although fees remain reasonable by international standards because of competition among advisers, according to experts.

This decade, Abu Dhabi and Dubai have part-privatised many government-owned companies, sparking an IPO flurry that runs counter to slowdowns in other regions.

Some wholly independent UAE companies such as Spinneys, a popular supermarket chain, and Al Ansari Financial Services have also completed flotations.

These listings have eased the dominance of banks and real estate companies on the bourses of Dubai and Abu Dhabi, providing greater diversification opportunities for investors and making the exchanges more representative of the UAE economy.

“An IPO will be one of the biggest corporate events in the life history of any company, so it tends to be a long process,” said Andrew Tarbuck, partner and head of capital markets at Al Tamimi & Co, a Dubai law firm.

Tarbuck estimated the process takes six to 12 months depending on a company’s circumstances.

“If you’re a company that has been extremely well run for years, follows International Financial Reporting Standards accounting rules, then you’re looking at a six-month timeframe and your costs will be lower,” he said.

“Whereas in a highly complex big transaction or a company that’s less prepared it’ll be a minimum of 12 months, with all the advisors working for that extra time.”

Andrew Tarbuck, partner and head of capital markets at Dubai law firm Al Tamimi & CoTamimi & Co
Andrew Tarbuck, partner and head of capital markets at Dubai law firm Al Tamimi & Co

Spinneys, which spent about AED 10 million ($2.7 million) on its IPO according to a company presentation, took about 10 months to complete the process, Sunil Kumar, the supermarket’s chief executive, told AGBI.

EY helped with Spinneys’ IPO and has participated in the flotations of many UAE companies. These include Abu Dhabi government-run entities Adnoc Gas, Adnoc Drilling, Adnoc Logistics and Services, Al Yah Satellite Communications Co (Yahsat) and Borouge, a petrochemicals manufacturer, plus Dubai government companies Salik and Parkin.

“Every IPO is different,” said Gregory Hughes, a partner and EY’s Middle East and North Africa IPO leader. “The jurisdiction of the listing – and whether it is a local offering or has an international element – guides a lot of the work we do.”

EY’s work spans myriad functions. These start with early planning, readiness assessments and preparation activities and also encompass the likes of commercial, financial and tax due diligence – not only for the issuing companies themselves but also regulators and banks. EY contributes to drafting an IPO prospectus and valuing the company.

Regulatory complexities

The UAE’s unusual regulatory landscape makes IPOs more complicated. The Securities and Commodities Authority (SCA) regulates Dubai Financial Market and Abu Dhabi Securities Exchange, while the Dubai Financial Services Authority performs the same role for Nasdaq Dubai.

EY's Gregory Hughes: "Due to the increased competition from an advisory perspective, costs haven't spiralled out of control"EY
EY’s Gregory Hughes: “Due to the increased competition from an advisory perspective, costs haven’t spiralled out of control”

Companies going public incur other one-off and ongoing fees, many of which are for services provided by third parties, said EY’s Hughes.

These include strategy support, enhanced external auditing, investor relations and financial public relations, stock exchange fees, and company secretarial support.

“Competition is strong across the most active independent financial advisors and banks in the region – local and international – and also for the other support roles,” said Hughes.

“The time to market has improved. Due to the increased competition from an advisory perspective, costs haven’t spiralled out of control.” 

In an IPO participating law firms will work for the company itself or its banks. The former role includes acting partly as a project manager.

If a company plans to list on the Dubai Financial Market or Abu Dhabi Securities Exchange the SCA must first approve its IPO prospectus. Its law firm will liaise with the SCA to achieve this.

“There are multiple sources of law and regulation for SCA-approved IPOs which have evolved over time and, unfortunately, there’s not a single source for laws and regulations – nor an official translation – and so it is challenging,” said Tarbuck.

The failure of Marka, a Dubai-based retailer which raised AED 500 million in an IPO in April 2014 but was declared bankrupt in 2021, has made the SCA more wary of approving flotations of non-government companies and more rigorous in scrutinising prospectuses. That has raised costs.

“The logic would be that the more times you do the IPO process, the more times the SCA has seen an IPO prospectus it should become easier,” said Tarbuck.

“But the rules change, become more sophisticated, disclosure levels improve, so the IPO process can’t be commoditised because every deal is different. It never reaches a position where you have economies of repetition.”

Most fees will go to participating banks, followed by law firms and accountants and then other advisors.

Legal fees for IPO lawyers are almost always capped, although there will be additional payments if unforeseen work is required.

Tarbuck estimates most IPOs overrun their legal fee caps. Bank fees are more rigid although there is usually a discretionary, extra success fee.

Other additional costs include listing and incorporation fees. If a company requires significant pre-IPO restructuring or a business carve-out such work can be expensive. 

Some government-related entities must first become standalone companies. Salik, a listed road toll operator, for example, was formerly a department within Dubai Roads and Transport Authority.

“Another big cost that’s often overlooked is the opportunity cost of management’s time – the issuer’s senior management must continue to run the business whilst acceding to the myriad requirements of all of the IPO advisers,” added Tarbuck.

“Companies mustn’t lose focus on optimising their business at the most crucial time. An IPO can be very arduous for the senior management. Opportunity cost is a really big thing, it’s not just the quantum of fees.”

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