Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

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

In a recently available study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more inclined to make acquisitions during periods of high economic policy uncertainty, which contradicts the conduct of Western companies. For instance, large Arab finance institutions secured takeovers throughout the financial crises. Furthermore, the analysis demonstrates that state-owned enterprises are not as likely than non-SOEs to create acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs are far more cautious regarding acquisitions 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 mitigate prospective financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target companies.

Strategic mergers and acquisitions have emerged as a way to tackle obstacles worldwide businesses face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their presence in the GCC countries face different difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. However, if they acquire regional businesses or merge with regional enterprises, they gain instant use of local knowledge and study their local partner's sucess. One of the most prominent cases of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised being a strong contender. Nonetheless, the acquisition not merely eliminated local competition but in addition provided valuable regional insights, a customer base, and an already established convenient infrastructure. Additionally, another notable example could be the acquisition of a Arab super app, particularly a ridesharing company, by an worldwide ride-hailing services provider. The multinational business obtained a well-established brand name by having a large user base and considerable knowledge of the area transportation market and client choices through the acquisition.

GCC governments actively encourage mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a way to solidify companies and build up regional businesses to be effective at compete on a international level, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to bring in FDI by creating a favourable ecosystem and bettering the ease of doing business for international investors. This strategy is not only directed to attract international investors since they will contribute to economic growth but, more critically, to enable M&A deals, which in turn will play a substantial role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.