Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

International businesses attempting to enter GCC markets can overcome local challenges through M&A activities.

In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western companies. As an example, large Arab banking institutions secured takeovers during the 2008 crises. Additionally, the study demonstrates that state-owned enterprises are less likely than non-SOEs to produce takeovers during periods of high economic policy uncertainty. The results suggest that SOEs are far more prudent regarding acquisitions when comparing to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and mitigate prospective financial uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are related to a rise in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Certainly, this wealth impact highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by buying undervalued target businesses.

GCC governments actively promote mergers and acquisitions through incentives such as tax breaks and regulatory approval as a means to consolidate companies and develop regional businesses to become capable of competing on a international level, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives a lot of the M&A transactions into the GCC. GCC countries are working earnestly to invite FDI by making a favourable ecosystem and bettering the ease of doing business for foreign investors. This strategy is not only directed to attract international investors simply because they will add to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play a significant role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions have emerged as a way to tackle obstacles worldwide companies encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and expand their presence in the GCC countries face various challenges, such as cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, if they buy regional businesses or merge with regional enterprises, they gain immediate access to local knowledge and learn from their local partners. One of the most prominent examples of successful acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the purchase not merely removed local competition but also provided valuable regional insights, a client base, plus an already founded convenient infrastructure. Also, another notable instance may be the acquisition of an Arab super app, namely a ridesharing company, by an worldwide ride-hailing services provider. The international firm gained a well-established manufacturer by having a big user base and considerable familiarity with the area transport market and consumer choices through the acquisition.