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Mon 1 Jan 2007 12:00 AM

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Companies rue poor preparation ahead of local market listings

Survey finds 80% of businesses in UAE and Oman would prepare differently for their IPOs next time

Four out of five companies that go through an Initial Public Offering (IPO) in the UAE and Oman would do things differently if they were to go through the process again, a study by KPMG has found.

KPMG conducted a survey of companies listed on the Abu Dhabi Securities Market, Dubai Financial Market and Muscat Securities Market.

“The survey suggests that the main reasons for floating include improved business efficiency, raising start-up capital, and increased profile,” said Ashish Dave, head of private equity, KPMG Middle East and South Asia.

“Yet the extent of company resources required for a successful IPO process is often underestimated.”

The study found that 12% of CEOs and 24% of CFOs spent more than half of their time at work dealing with matters related to the IPO process. More than a third of companies experienced delays in their planned timetable for going public.

Dave added: “However, all companies surveyed believed the IPO met their objectives.

“Nearly half consider the main difference as a listed company to be increased profile and credibility.”

The survey found that the top reason for companies deciding to launch an IPO was to improve efficiency.

“This came as a surprise to us,” said Dave.

“The reason we came up with was that the due diligence process allowed them to find areas where compliance needed to be improved and where they could improve business efficiency.”

The other main reason given was to raise additional start-up capital. Surprisingly, given the large number of second and third generation family-owned businesses in the region, only 12% said that the creation of an exit route for shareholders was their main reason for listing.

The survey found that companies backed by private equity had fewer difficulties with the IPO process and were more likely to complete it on schedule.

Dale Gregory, senior manager, transaction services for KPMG in the UAE and Oman, explained: “This is almost certainly because when the private equity investor invests he is already thinking about an exit.”

One-third of companies experienced delays in their planned timetable for going public. The main reasons given were changes in market conditions, government approval and the availability of managers and brokers.

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