Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

Strategic alliances and acquisitions are effective strategies for multinational companies aiming to expand their operations in the Arab Gulf.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a means to solidify industries and develop local companies to become capable of compete on a worldwide scale, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives much of the M&A deals in the GCC. GCC countries are working seriously to invite FDI by creating a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors simply because they will add to economic growth but, more critically, to facilitate M&A deals, which in turn will play a significant part in allowing GCC-based businesses to get access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow their presence within the GCC countries face various difficulties, such as for example cultural differences, unknown regulatory frameworks, and market competition. However, once they acquire local companies or merge with regional enterprises, they gain immediate usage of local knowledge and study their regional partners. The most prominent cases of successful acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce firm recognised as a strong competitor. However, the acquisition not merely removed local competition but in addition offered valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Moreover, another notable instance is the purchase of a Arab super application, particularly a ridesharing company, by the international ride-hailing services provider. The international business gained a well-established brand name having a big user base and substantial familiarity with the local transportation market and consumer preferences through the acquisition.

In recently published study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western businesses. For example, big Arab finance institutions secured acquisitions throughout the 2008 crises. Moreover, the study demonstrates that state-owned enterprises are more unlikely than non-SOEs to create takeovers during times of high economic policy uncertainty. The results indicate that SOEs tend to be more prudent regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, stems from the imperative to protect national interest and minimising prospective financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by capturing undervalued target companies.