Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

Strategic alliances and acquisitions are effective approaches for international companies planning to expand their presence into the Arab Gulf.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles international companies encounter in Arab Gulf countries and emerging markets. Businesses attempting to enter and expand their reach into the GCC countries face different difficulties, such as for instance cultural differences, unfamiliar regulatory frameworks, and market competition. However, if they buy local businesses or merge with local enterprises, they gain instant usage of regional knowledge and learn from their local partner's sucess. The most prominent examples of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce company recognised being a strong rival. Nevertheless, the acquisition not merely eliminated local competition but also provided valuable local insights, a client base, as well as an already founded convenient infrastructure. Also, another notable example could be the acquisition of an Arab super software, specifically a ridesharing business, by the international ride-hailing services provider. The multinational business obtained a well-established manufacturer having a big user base and considerable understanding of the local transport market and client preferences through the purchase.

In a recently available study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For example, big Arab banking institutions secured acquisitions throughout the financial crises. Additionally, the research suggests that state-owned enterprises are not as likely than non-SOEs to create takeovers during periods of high economic policy uncertainty. The the findings indicate that SOEs are far more prudent regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to preserve national interest and minimising prospective financial instability. Furthermore, acquisitions during times of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Certainly, this wealth impact highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by capturing undervalued target businesses.

GCC governments actively promote mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a means to solidify industries and build regional companies to become capable of contending at an a global level, as would Amin Nasser likely let you know. The necessity for economic diversification and market expansion drives a lot of the M&A activities in the GCC. GCC countries are working seriously to attract FDI by developing a favourable ecosystem and increasing the ease of doing business for international investors. This plan is not only directed to attract foreign investors since they will contribute to economic growth but, more critically, to enable M&A deals, which in turn will play a significant part in enabling GCC-based companies to achieve access to international markets and transfer technology and expertise.