Why M&As in GCC countries are recommended

Why M&As in GCC countries are recommended

Blog Article

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

Strategic mergers and acquisitions have emerged as a way to overcome hurdles international businesses encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach in the GCC countries face various problems, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, when they acquire regional businesses or merge with local enterprises, they gain instant access to regional knowledge and learn from their local partner's sucess. One of the most prominent cases of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised as a strong competitor. But, the acquisition not only removed local competition but additionally provided valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Moreover, another notable instance could be the acquisition of an Arab super application, particularly a ridesharing company, by an worldwide ride-hailing services provider. The international business gained a well-established manufacturer with a large user base and substantial familiarity with the local transportation market and client choices 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 consolidate industries and build regional businesses to be capable of contending at an a worldwide scale, as would Amin Nasser likely inform you. The necessity for economic diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working seriously to attract FDI by creating a favourable environment and bettering the ease of doing business for international investors. This plan is not merely directed to attract international investors because they will contribute to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play an important part in enabling 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 authors found that Arab Gulf firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western companies. For instance, large Arab banking institutions secured takeovers throughout the 2008 crises. Also, the research demonstrates that state-owned enterprises are more unlikely than non-SOEs in order to make takeovers during times of high economic policy uncertainty. The the findings suggest that SOEs tend to be more cautious regarding takeovers in comparison 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 mitigate potential financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth impact is more noticable for SOEs. Certainly, this wealth impact highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target companies.