Exactly why M&As in GCC countries are encouraged

Exactly why M&As in GCC countries are encouraged

Blog Article

Strategic alliances and acquisitions are effective strategies for international companies looking to expand their operations within the Arab Gulf.

GCC governments actively promote mergers and acquisitions through incentives such as tax breaks and regulatory approval as a way to solidify industries and build regional businesses to be effective at compete at an a global scale, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A deals into the GCC. GCC countries are working earnestly to entice FDI by developing a favourable ecosystem and bettering the ease of doing business for international investors. This strategy is not only directed to attract foreign investors since they will add to economic growth but, more most importantly, to enable M&A transactions, which in turn will play an important role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.

In a recent study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. For example, large Arab financial institutions secured acquisitions throughout the financial crises. Also, the analysis suggests that state-owned enterprises are less likely than non-SOEs to create acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs tend to be more cautious regarding takeovers when comparing to 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 uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth impact 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 buying undervalued target businesses.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles international businesses encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach within the GCC countries face various challenges, such as cultural differences, unfamiliar regulatory frameworks, and market competition. However, when they acquire regional companies or merge with local enterprises, they gain instant usage of regional knowledge and study their regional partners. The most prominent examples of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised being a strong competitor. Nevertheless, the acquisition not merely removed regional competition but in addition provided valuable local insights, a customer base, plus an already founded convenient infrastructure. Moreover, another notable example is the purchase of a Arab super application, namely a ridesharing business, by the international ride-hailing services provider. The multinational firm gained a well-established brand with a big user base and substantial understanding of the local transport market and client preferences through the purchase.