Savvy companies are now looking to employ top notch public relations expertise not only to help manage their listing process, but promote the company’s reputation on a continuing basis, explains Mark Fisher.
As the feel good factor has returned to many sectors of the UAE economy, more SMEs are busy preparing for expansion by considering the option of raising capital on a stock exchange. Some are actively making plans to do so. Among the many reasons driving this trend, valuation plays a significant role. The FTSE NASDAQ Dubai UAE 20 index, which tracks share prices across all three UAE exchanges, has risen 56% so far this year. Of course, an overall increase in share prices does not guarantee a high valuation for a particular company that might choose to go public soon. But a buoyant market does create a positive environment to introduce an initial public offering (IPO).
In UAE’s economy, the mood of optimism is reflected in the prospects of many thousands of companies based both inside and outside its free zones. The sectors witnessing active participation range from construction and property to technology and energy, as well as many others. As these companies update their business plans and revenue projections, many are seeing new opportunities for growth that were simply not available in recent years. Seizing these opportunities often requires new sources of funding, and this need is building much of the growing interest in carrying out an IPO. A bank loan may (or may not) be easier to arrange than a few years ago, but the terms are not likely to be very different; whereas the valuation that can be expected from a share issue has, for many companies, changed substantially for the better.
Every company that goes public needs good advisors. These can include external accountants and lawyers, as well as an advisory firm or a bank playing a sponsorship role, depending on which exchange is selected. Availability of high quality advice that does not cost the earth is critical for smaller issuers, who rightly wish to keep costs down to a sensible percentage of the capital they wish to raise. Moving to UAE, the advisory landscape has developed markedly in the past year or so, with more firms focusing their resources and fee structures specifically towards the SME market. IPO candidates, therefore, have an expanding field of advisors to choose from. NASDAQ Dubai is working closely with many of these advisors to further ease the path of potential issuers towards an exchange listing. Much of this activity is taking place through the exchange’s SME Advisory Group, which it set up earlier this year as part of its preparations to list more SME and high-growth companies.
As more companies look ahead to going public, they are preparing to take full advantage of listed status once it has been achieved. One of the benefits is higher visibility in the minds of business partners and the public, driven by the articles that the media like to write about developments at listed companies such as new business activities and movements in the share price. In the case of a listing on NASDAQ Dubai, this raised profile can be global as well as regional, in line with the exchange’s international investor base. Savvy companies are employing top notch public relations expertise not only to help manage a listing itself, but to promote the company’s reputation on a continuing basis afterwards.
Governance is another area that companies are focusing on. Governance requirements vary from exchange to exchange, but the basic principles are similar. They include having a Board of Directors containing appropriate expertise and competence, clear reporting lines within the company, and proper management of finances. Good corporate governance, like effective public relations, is often given priority by companies specifically in order to achieve a listing; but its positive effects continue to be felt ever afterwards through the efficient manner in which the company is run.
For companies that see listing as a viable option, it’s never too early to find out what needs to be done.