Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

Strategic alliances and acquisitions offer companies with several benefits whenever entering unfamiliar markets.

Strategic mergers and acquisitions have emerged as a way to overcome hurdles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their presence within the GCC countries face various problems, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nevertheless, if they acquire regional companies or merge with local enterprises, they gain instant usage of local knowledge and study their regional partner's sucess. One of the more prominent examples 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 company recognised as being a strong competitor. Nevertheless, the purchase not only eliminated local competition but also offered valuable regional insights, a client base, plus an already established convenient infrastructure. Moreover, another notable instance may be the purchase of a Arab super app, specifically a ridesharing business, by the worldwide ride-hailing services provider. The multinational corporation gained a well-established brand name with a large user base and substantial knowledge of the local transport market and consumer preferences through the acquisition.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to solidify companies and build up local companies to become effective at contending on a international level, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A transactions in the GCC. GCC countries are working earnestly to draw in FDI by developing a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not merely directed to attract international investors since they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play an important part in enabling GCC-based businesses to achieve access to international markets and transfer technology and expertise.

In a recent study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western firms. For instance, big Arab finance institutions secured takeovers throughout the financial crises. Additionally, the study shows that state-owned enterprises are more unlikely than non-SOEs to make takeovers during times of high economic policy uncertainty. The results indicate that SOEs are far more cautious regarding takeovers in comparison to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to preserve national interest and mitigate prospective financial uncertainty. Furthermore, takeovers during periods of high economic policy uncertainty are associated with a rise in investors' wealth for acquirers, and this wealth impact is more noticable for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target businesses.