#SaudiArabia: Venture Capital Firms Bet on M&A as Listings Get Tougher - Bloomberg

Saudi Arabia: Venture Capital Firms Bet on M&A as Listings Get Tougher - Bloomberg

Saudi Arabian venture capital firms expect more mergers and acquisitions in the startup space, as stock market weakness and higher valuation scrutiny make initial public offerings less appealing.

Investors want exposure to fast-growing companies, but without the volatility that comes with public markets, said Abdullah Altamami, founder and chief executive officer of Merak Capital. “Buyers are more interested in companies before they go public, because once they go public, they’re more expensive.”

As a result, M&A and secondary transactions are set to account for a greater share of exits in the kingdom if conditions remain tight, Altamami said. Merak Capital, which manages about $800 million, expects five to 10 liquidity events across its portfolio over the next 12 to 24 months, spanning IPOs, acquisitions and secondary deals.

The shift comes as Saudi Arabia’s startup ecosystem matures under Vision 2030, the government’s push to diversify the economy beyond oil. Venture firms have backed companies across sectors including gaming, fintech, cybersecurity, tourism and fashion.

But public markets have come under pressure this year. The Saudi benchmark index is among the worst performers in emerging markets, and while IPO proceeds have held steady at around $4 billion, several recent listings have struggled.

Meanwhile, the Middle East became the leading M&A destination across emerging venture markets in the first nine months of the year, with 26 deals, according to data platform Magnitt.

Against that backdrop, acquisitions and secondary sales are emerging as a quicker, more dependable route to returns.

“The market is reaching a level of maturity where more M&A opportunities will surface,” said Basmah Alsinaidi, managing partner and vice chair at Impact46. She expects activity to be driven both by technology companies seeking scale and by traditional businesses looking to add digital capabilities.

Impact46 has backed firms including Jahez International Co. and Rasan Information Technology Co. that have listed on Saudi exchanges in recent years. Its portfolio also includes Lucidya, a customer experience management platform, and Tamara, which became a unicorn — a startup valued at more than $1 billion — in 2023.

Most Gulf markets fall on lower oil prices | Reuters

Most Gulf markets fall on lower oil prices | Reuters

Most stock markets in the Gulf eased on Thursday, as weaker oil prices drove selling in thin volume trade as the Christmas holidays kept foreign investors away.

Oil, a driver for the Gulf's financial markets, settled marginally lower on Wednesday and was on course for the steepest annual decline since 2020 as investors weighed the implication for demand of U.S. economic growth and assessed the risk of supply disruptions from Venezuela and Russia.

Lower crude prices and disruptions to oil exports affect the fiscal balances of oil-dependent countries.

Saudi Arabia's benchmark index (.TASI), opens new tab fell 0.1%, weighed down by a 0.9% fall in the country's biggest lender, Saudi National Bank (1180.SE), opens new tab.

Elsewhere, shares in oil giant Saudi Aramco (2222.SE), opens new tab were down 0.3%.

GCC stock markets were mostly negative on Thursday. Ahead of the year-end, liquidity could remain limited, said Daniel Takieddine Co-founder and CEO, Sky Links Capital Group. Markets are also expected to remain range-bound in the coming sessions.

Dubai's main share index (.DFMGI), opens new tab dropped 0.4%, dragged down by a 1.4% fall in blue-chip developer Emaar Properties (EMAR.DU), opens new tab.

In Abu Dhabi, the main index (.FTFADGI), opens new tab eased 0.1%.

The Qatari benchmark gauge (.QSI), opens new tab was down 0.3%, with Qatar Islamic Bank (QISB.QA), opens new tab falling 0.7%.

Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab declined 0.6%, with Commercial International Bank (COMI.CA), opens new tab losing 1.8%.

Middle East IPOs fall by a third as post-pandemic boom fades

Middle East IPOs fall by a third as post-pandemic boom fades

Listings in the Middle East have dropped more than a third to the weakest level since 2020, as lower oil prices put pressure on Saudi Arabia’s economy and sell-offs of newly floated companies deterred investors. 

Companies in the region had raised $6.5bn in initial public offerings by the end of November, compared with $9.9bn in the same period last year, according to financial data platform Dealogic. 

Listings for the full year are set to be the weakest since companies raised $2.4bn in 2020, and down sharply from 2022 when IPOs pulled in $22.5bn from 62 deals. 

In addition to weaker oil prices, investors and bankers have blamed poor performances by newly listed companies and a dearth of privatisations, after offerings by state-owned companies and financial regulatory reforms had driven a healthy pipeline of deals after the pandemic. 

Ali Khalpey, head of Middle East at Cantor, said the slowdown came after a “very strong run” and investors were now “looking back and taking stock of where valuations were . . . It’s no longer ‘let’s all pile into an IPO’.” 

Carl Tohme, Dubai-based fund manager at hedge fund Cheyne Capital, said Saudi Arabia and the United Arab Emirates had “enjoyed three or four years of really positive momentum” due to weakness in China, a strong dollar and “the structural story with all the reforms” in oil-rich Gulf countries. 

“Now, you have China that is investable again and doing very well, [and] the dollar is weak, especially against emerging market currencies. While the fundamental story of population growth in the UAE is still strong, the Saudi story is challenged mainly by the lower oil price,” he said. 

The UAE’s markets in Dubai and Abu Dhabi have raised just $1bn this year, down from $6bn last year and a high of $12bn in 2022. 

A much-anticipated IPO by Etihad, Abu Dhabi’s national carrier, failed to materialise this year. Dubai’s stock market suffered a setback when local online classifieds company Dubizzle pulled its planned listing, saying it was waiting for “optimal timing”. 

Saudi facilities management company EFSIM this month became the latest to cancel an IPO, pulling a flotation that was expected to give it a valuation of almost $300mn. 

Private businesses in the region also get crowded out as investors favour state-owned companies that enjoy monopolies and offer investors steady and secure dividends. 

Anita Gupta, chief investment officer at Dubai-based Wealthbrix Capital Partners, said: “I would say that we are spoiled in this market . . . [by] very high dividend-yielding entities with quality assets.” 

In contrast, shares of some of the highest-profile companies that listed last year have slumped. 

That created “a big overhang in the market”, said Finlay Wright, head of equity markets for the Middle East and Asia at Rothschild. “It makes people nervous around the outlook for other entities that might come.” 

Delivery company Talabat has sunk about 25 per cent since its Dubai listing in December 2024, in the Gulf’s biggest IPO of the year. Lulu Retail, a supermarket chain, has fallen about 40 per cent since its debut in Abu Dhabi in November last year, while grocer Spinneys has lost about 6 per cent since floating in Dubai. 

Dubai’s two IPOs of 2025 capitalised on soaring property prices, with construction company ALEC, majority owned by the Dubai government, raising $381mn. Dubai Holding, owned by the emirate’s ruler, raised $584mn floating a real estate investment trust. IT group Alpha Data raised $163mn in Abu Dhabi, the exchange’s sole IPO this year. 

Saudi Arabia, the region’s largest economy, has had the most IPOs so far, with 36 companies joining Riyadh’s Tadawul stock exchange and raising $4bn — roughly the same as last year despite the all-share index falling about 12 per cent year to date. Riyadh typically attracts a higher number of smaller listings than the UAE. 

But investor confidence has been weighed down by lower oil prices and a widening fiscal deficit, which have led the government to reassess some megaprojects aimed at revamping its oil-reliant economy. 

Share prices of major companies that listed on Riyadh’s bourse this year have slumped. Budget airline Flynas is down 17 per cent since raising $1bn in June, while packaging maker United Carton Industries has fallen 40 per cent since it raised $160mn the previous month. 

Several companies “have missed the earnings guidance which had been out in the market, and that has a very negative effect on price performance”, said Rothschild’s Wright. 

Smaller Gulf countries have been unable to capitalise on last year’s momentum, with Bahrain and Kuwait — which both managed one IPO last year — having none in 2025. Oman raised $333mn from one listing this year, having secured $2.5bn in three IPOs in 2024.