JobXDubai

Despite global economic uncertainties and recent stock market volatility, the Middle East and North Africa (MENA) region is poised for a significant market boom. A new study by global consultancy RedSeer predicts that the region’s “Rhinos” – resilient startups valued at over $100 million – are set to create a market capitalization exceeding $50 billion through initial public offerings (IPOs).

Key Highlights

• Over 60 Rhinos expected to go public in the next 3-5 years
• MENA projected to see 200+ IPOs from now until 2029
• Digital Rhinos to account for 30% of IPOs in the next 5 years
• Average time to IPO in MENA: 8 years (compared to 11 years globally)

The Rise of MENA’s Rhinos

While the global startup ecosystem chases unicorns, MENA is nurturing a different breed of successful ventures – Rhinos. These companies are characterized by their resilience, strong fundamentals, and ability to achieve profitability faster than their global counterparts.

Notable Rhinos Across Sectors

1. Fintech: Tabby, Tamara
2. Foodtech: Kitopi, ToYou
3. Classified Ventures: Bayt, Property Finder
4. B2B/SaaS: FOODICS, UNIFONICs

Akshay Jayaprakasan, Dubai-based Associate Partner at RedSeer Strategy Consultants, emphasizes the importance of Rhinos: “In the current macroeconomic context, Rhinos are more relevant and deserve praise for building businesses with strong fundamentals, achieving profitability faster, and driving sustained 15% growth over the years.”

MENA’s IPO Landscape

The MENA region has witnessed a surge in IPOs over the past five years, with 2022 being a standout year featuring 51 issues. During the 2018-2023 period, the region saw over 170 IPOs, generating more than $80 billion in proceeds.

Notable IPOs (Proceeds over $1 billion each)

• Saudi Aramco
• ADNOC
• Saudi Tadawul Group
• Salik
• Dubai Electricity and Water Authority
• Borouge
• Luberef

Factors Driving the Market Boom

1. Faster Time to IPO: MENA Rhinos are going public in an average of 8 years, compared to 11 years globally.
2. Sector Diversity: Rhinos exist across various sectors, powering about 70% of MENA’s digital economy.
3. Value Creation through Digitalization: Khaldoon Tabaza, Managing Director of iMENA, notes, “Digitalisation has enabled significant value creation as well as value transfer between traditional and digital players across all sectors in the economy.”
4. Consolidation Opportunities: Sectors like foodtech, online retail, logistics, and tech/SaaS are ripe for consolidation, which could catalyze IPO readiness.

Challenges and Opportunities

While the outlook is optimistic, there are challenges to consider:

1. Growth Capital Gap: The region’s growth capital share is about 40% lower than the global average.
2. Limited Unicorns: MENA accounted for just 6 unicorns in 2023, compared to 1,357 globally.
3. M&A Activity: About 70 Rhinos are expected to take the merger and acquisition route to fill gaps and drive synergies.

Looking Ahead

The MENA region’s digital economy is at a pivotal point. With Rhinos leading the charge and a favorable IPO environment, the next five years could see a transformation in the region’s economic landscape.

Jayaprakasan concludes, “Scale is important for the IPO readiness of Rhinos, and consolidation is imminent in many sectors in the short term, which will serve as a catalyst for IPO readiness in the medium term.”